Shown below are selected ledger accounts from the trial balance of a parent and its subsidiary as of December 31, Year 9.

Additional Information
€¢ P Company purchased its 90% interest in S Company in Year 1, on the date that S Company was incorporated, and has followed the equity method to account for its investment since that date.
€¢ On April 1, Year 5, land that had originally cost $15,000 was sold by S Company to P Company for $21,000. P purchased the land with the intention of developing it, but in Year 9 it decided that the location was not suitable and the land was sold to a chain of drug stores.
€¢ On January 1, Year 2, P Company issued $200,000 face value bonds due in 10 years. The proceeds from the bond issue amounted to $190,000.
€¢ On July 1, Year 9, S Company purchased $40,000 of these bonds on the open market at a cost of $38,750. Intercompany bondholding gains (losses) are allocated between the two affiliates.
€¢ S Company had $75,000 in sales to P Company during Year 9.
€¢ Use income tax allocation at a 40% tax rate.
Required:
(a) Prepare a consolidated income statement for Year 9.
(b) Prepare a consolidated statement of retained earnings for Year 9.

P Co S Co $39,000 Investment in bonds of P Investment in shares of S (equity method) Sales Interest income Investment income Gain on sale of land Common shares Retained earnings Bonds payable 8% Cost of sales Interest expense Selling and administrative expense Income tax expense Dividends 139,899 630,000 340,000 1,850 15,339 7,000 300,000 85,000 198,000 485,000 17,000 50,000 34,000 10,000 100,000 50,000 300,000 20,000 8,740 8,000