On May 1, 2015, Peters Company purchased 80% of the common stock of Smith Company for $50,000. Additional data concerning these two companies for the years 2015 and 2016 are:

Any difference between book value and the value implied by the purchase price relates to Smith Company's land. Peters Company uses the cost method to record its investment.
Required:
A. Prepare the work paper entries that would be made on a consolidated statements work paper for the years ended December 31, 2015 and 2016 for Peters Company and its subsidiary, assuming that Smith Company's income is earned evenly throughout the year.
B. Calculate consolidated net income and consolidated retained earnings for 2015 and 2016.

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2015 2016 Peters Smith Peters Smith Common stock Other contributed capital Retained earnings, 1/1 Net income (loss) Cash dividends (11/30) $100,000 40,000 80,000 64,000 15,000 S25,000 10,000 10,000 45,000 2,000 $100,000 40,000 129,000 37,500 5,000 $25,000 10,000 53,000 (5,000)