On January 1, 2013, 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 inventories were sold in 2013 and the remaining inventory was sold in 2014. The bonds mature in eight years.

On December 31, 2013, Phelps Company's inventory contained $10,000 in unrealized intercompany profit.

During 2014 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 2014 ending inventory. As of December 31, 2014, Sloane Company owes Phelps Company $40,000 for merchandise purchased during 2014.

Equipment with a book value of $500,000 was sold by Sloane Company on January 2, 2014, to Phelps Company for $640,000. This equipment had an estimated useful life when purchased by Sloane Company on July 1, 2011, of 10 years.

Financial data for 2014 are presented here:

Required:
Prepare a consolidated financial statements work paper for the year ended December 31, 2014.

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Phelps Company Sloane Company $1,291,500 1,334,000 700,000 300,000 Cost of Goods Sold nse Total Cost and Expense 1/1 Retained Earnings Dividends Declared S 604,500 $ 430,000 Accounts Receivable Investment in Sloane Company (200,000) (200,000) S 2,352,000 s 167,500 Total Liabilities and Equity 1.345.000