Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $540,000 on January 1, 2009, when Sedbrook Company’s retained earnings were $100,000. Preclosing trial balances for the two companies at December 31, 2013, are presented here:

The January 1, 2013, inventory of Sedbrook Company includes $30,000 of profit recorded by Pruitt Corporation on 2012 sales. During 2013, 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 2013 from Pruitt for $50,000. Pruitt Corporation uses the complete equity method to record its investment in Sedbrook Company.

Required:
A. Prepare the consolidated statements workpaper for the year ended December 31, 2013.
B. Calculate consolidated retained earnings on December 31, 2013, using the analytical or t-accountapproach.

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Pruitt Sedbrook Conporation Company 80,000o 112,500 110,000 Cash Accounts Receivable (net) Inventory 1/1 Investment in Sedbrook Co Other Assets Dividends Declared Purchases Other Expenses 83,000 213,000 150,000 568,250 500,000 100,000 850,000 180,000 $2,644,250 400,000 30,000 350,000 137,500 1,220,000 Accounts Payable Other Liabilities Common Stock Retained Earnings, 1/1 Sales Equity in Subsidiary Income 70,000 75,000 800,000 532,000 1,100,000 67,250 $2,644,250 30,000 40,000 500,000 120,000 530,000 1,220,000 Ending Inventory 200,000 120,000