Interim Purchase of Stock, Full-Year Reporting Alternative, Cost Method On May 1, 2000, Peters Company purchased 80% of the common stock of Smith Company for $50,000. Additional data concerning these two companies for the years 2000 and 2001 are: LO6 2000 2001 Peters Smith Peters Smith Common Stock $100,000 $25,000 $100,000 $25,000 Other Contributed Capital 40,000 10,000 40,000 10,000 Retained Earnings (1/1) 80,000 10,000 120,000 53,000 Net Income (loss) 64,000 45,000 37,500 (5,000)
Cash Dividends (11/30) 15,000 2,000 5,000 —0—

Any difference between cost and book value relates to Smith Company's land. Peters Company uses the cost method to record its investment.
Required:
A. Prepare the workpaper entries that would be made on a consolidated statements workpaper for the years ended December 31, 2000 and 2001 for Peters Company and its subsidiary, assuming that Smith Company’s income is earned evenly throughout the year.
(Use the full-year reporting alternative.)
B. Calculate consolidated net income and consolidated retained earnings for 2000 and 2001.