Kennelly Corporation purchased all the common shares of Short Company on January 1, 20X5, for \(\$ 180,000\). On that date, the book value of the net assets reported by Short Company was \(\$ 150,000\). The entire purchase differential was assigned to depreciable assets with a six-year remaining economic life from January \(1,20 \mathrm{X} 5\).

The adjusted trial balances for the two companies on December \(31,20 \mathrm{X} 5\), are as follows:

Kennelly Corporation uses the equity method in accounting for its investment in Short Company. Short Company dividends were declared and paid on December 31, 20X5.
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a. Prepare the eliminating entries needed as of December 31, 20X5, to complete a consolidation workpaper.

b. Prepare a three-part consolidation workpaper as of December 31, 20X5.

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Kennelly Corporation Short Company Debit Credit Item Debit Cash $ 15,000 Credit $ 5,000 Accounts Receivable 30.000 40.000 Inventory 70,000 60.000 Depreciable Assets (net) 325.000 225,000 Investment in Short Company Stock 195,000 Depreciation Expense 25.000 15,000 Other Expenses 105.000 75.000 Dividends Declared 40.000 10,000 Accounts Payable Notes Payable $ 50.000 $ 40.000 100.000 120,000 Common Stock 200.000 100,000 Retained Earnings 230.000 50,000 Sales 200.000 120.000 Income from Subsidiary 25,000 $805.000 $805.000 $430.000 $430,000