PROBLEM 611 Downstream WorkpaperPartial Equity Method LO 6 Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $540,000 on January 1, 2017, when Sedbrook Company's retained earnings were $100,000. Preclosing trial balances for the two companies at December 31, 2021, are presented here:

Pruitt Corporation Sedbrook Company

Cash $ 83,000 $ 80,000

Accounts Receivable (net) 213,000 112,500

Inventory 1/1 150,000 110,000

Investment in Sedbrook Co. 578,250

Other Assets 500,000 400,000

Dividends Declared 100,000 30,000

Purchases 850,000 350,000

Other Expenses 180,000 137,500

$2,654,250 $1,220,000

Accounts Payable $ 70,000 $ 30,000

Other Liabilities 75,000 40,000

Common Stock 800,000 500,000

Retained Earnings 562,000 120,000

Sales 1,100,000 530,000

Equity in Subsidiary Income 47,250

$2,654,250 $1,220,000

Ending Inventory $ 200,000 $ 120,000

The January 1, 2021, inventory of Sedbrook Company includes $30,000 of profit recorded by Pruitt Corporation on 2020 sales. During 2021, Pruitt Corporation made intercompany sales of $200,000 with a markup of 25% on cost. The ending inventory of Sedbrook Company includes goods purchased in 2021 from Pruitt for $50,000. Pruitt Corporation uses the partial equity method to record its investment in Sedbrook Company. Required:

a)Prepare the consolidated statements workpaper for the year ended December 31, 2021.

b)Calculate consolidated retained earnings on December 31, 2021, using the analytical or taccount approach.