On January 1, 2010, Phelps Company purchased an 85% interest in Sloane Company for $955,000 when the retained earnings of Sloane Company were $150,000. The difference between implied and book value was assigned as follows:

Inventory.........$48,000

Land..........36,000

Discount on Bonds Payable...48,000

Goodwill..........91,529

One-half of the inventory was sold in 2010 and the remaining inventory was sold in 2011. Thebonds mature in eight years. On December 31, 2010, Phelps Company’s inventory contained $10,000 in unrealized intercompany profit. During 2011 Phelps Company sold merchandise with a cost of $200,000 to Sloane Company at a 30% markup on cost. Only $65,000 (selling price) of this merchandise remains in Sloane Company’s 2011 ending inventory. As of December 31, 2011, Sloane Company owes Phelps Company $40,000 for merchandise purchased during 2011. Equipment with a book value of $500,000 was sold by Sloane Company on January 2, 2011, to Phelps Company for $640,000. This equipment had an estimated useful life when purchased by Sloane Company on July 1, 2008, of 10 years.

Financial data for 2011 are presented here:

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Required:
Prepare a consolidated financial statements workpaper for the year ended December 31,2011.

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Phelps Company Sloane Company 1,291,500 Sales Other Income Dividend Income 560,000 140,000 Total Revenue Cost of Goods Sold Depreciation Expense Interest Expense Other Expenses 42,500 1.334.000 660,000 138,000 8,000 174,000 980,000 354,000 300,000 20,000 10,000 140,000 70.000 230,000 Total Cost and Expense Net Income 250,000 230,000 (50,000) $ 490,000 70,000 210,000 175,000 S 350,500 354,000 (100,000) 1/1 Retained Earnings Net Income Dividends Declared 12/31 Retained Earnings Cash Accounts Receivable Inventory Investment in Sloane Company Land Plant and Equipment Accumulated Depreciation S 604,500 127,000 300,000 270,000 955,000 100,000 800,000 (200,000) 2,352,000 290,000 800,000 (200,000) Total Assets 1,345.000 Accounts Payable Bonds Payable Capital Stock Retained 167,500 80,000 1,500,000 604,500 2,352,000 65,000 100,000 750,000 430,000 1.345.000 Earnings Total Liabilities and Equity