On January 1, 2012, Perry Company purchased 80% of Selby Company for $990,000. At that time Selby had capital stock outstanding of $350,000 and retained earnings of $375,000.

The fair value of Selby Company's assets and liabilities is equal to their book value except for the following:

One-half of the inventory was sold in 2012, the remainder was sold in 2013. At the end of 2012, Perry Company had in its ending inventory $60,000 of merchandise it had purchased from Selby Company during the year. Selby Company sold the merchandise at 25% above cost. During 2013, Perry Company sold merchandise to Selby Company for $310,000 at a markup of 20% of the selling price. At December 31, 2013, Selby still had merchandise that it purchased from Perry Company for $82,000 in its inventory. Financial data for 2013 are presented here:
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Required:
A. Prepare the consolidated statements work-paper for the year ended December 31, 2013?
B. Calculate consolidated retained earnings on December 31, 2013, using the analytical or t-account approach?

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Fair Value Book Value Inventon Plant and Equipment (10-year life) $210,000 780,000 $160,000 630,000 Perry Company Selby Company $1,400,000 800,000 Cost of Goods Sold: Beginning Inventory Cost of Goods Available Less: Ending Inventory Cost of Goods Sold Total Cost and Expense 1/1 Retained Earnings $1,500,000 Dividends Declared 50,000) $1,940,000 Accounts Receivable (net) Investment in Selby Company Plant and Equipment (net) Other Assets (net) Accounts Payable Other Liabilities 102,000 Retained Earnings Total Liabilities and Equity $3,077,000 $1,175,000