On January l, 2014, the Phillips Company acquired all of the outstanding shares of Standard, Ltd., a U.K. firm, for £8,000,000 in cash. At the end of 2014, the two companies presented the condensed financial statements below.

At date of acquisition, the exchange rate was $2/£. Standard's inventory and buildings were undervalued by £100,000 and £500,000, respectively. All of the undervalued inventory was sold during the year, and the buildings are depreciated over a 20-year life, straight-line. Other relevant information is as follows:
1. The exchange rate at the end of 2014 was $2.30/£. The average exchange rate for 2014 was $2.15/£.
2. Goodwill impairment during 2014 was £200,000.
3. Phillips reports its Investment in Standard using the complete equity method. However, neither the equity method income accrual nor Phillips' share of the translation gain for 2014 have been booked. Intercompany dividends, paid when the exchange rate was $2.10/£, were credited to the investment account.
Required
Assuming the pound is Standard's functional currency, prepare a consolidated balance sheet and a consolidated statement of income and retained earnings for Phillips and Standard. All supporting schedules and computations should be in good form.

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Balance Sheets December 31, 2014 Phillips Standard Assets Cash and recelvables Inventory.s Property, plant and equipment, net. . . . . . . $ 2,100,000 4,000,000 12,000,000 13.900,000 £ 3,000,000 3,000,000 5,000,000 … . . . . . . . . Total assets... $32,000,000 211,000,000 Liabilities and Stockholders' Equity Current liabilities. Long-term debt Capital stock.. Retained earnings Total liabilities and stockholders' equity..^ 8,000,000 4,000,000 10,000,000 10,000,000 $32,000,000 £ 4,000,000 1,000,000 2,000,000 4,000,000 211,000,000 Statements of Income and Retained Earnings For Year Ended December 31, 2014 Phillips Standarod Sales. $30,000,000 20,000,000 1,000,000 5,000,000 26,000,000 4,000,000 £10,000,000 6,000,000 500,000 2,000,000 8,500,000 1,500,000 Cost of goods sold.a . Other operating expenses Net income Dividends Retained earnings, beginning..cnnan Retained earnings, ending... (2,000,000) 8,000,000 (1,000,000) 3,500,000 $10,000,000 E4,000,000