1) Philmon Corporation acquired 80% of Sonny Corporations common stock on January 1, 2009 for $210,000 cash. The stockholders equity of Sonny at this time consisted of $ 150,000 of capital stock and $ 50,000 of retained earnings. The difference between the price paid by Philmon and the underlying equity acquired in Sonny was due to a $ 12,500 undervaluation of Sonnys inventory, a $ 25,000 undervaluation of Sonnys equipment, and goodwill.

Additional Information:

1) The undervalued inventory items were sold by Sonny during 2009 and the undervalued equipment had a remaining useful life of five years. Straight line depreciation is used.

2) Sonny owed Philmon $ 4,000 on accounts payable at December 31, 2009

3) The separate financial statements of Philmon and Sonny Corporations at and for year ended December 31, 2009, appear in the first two columns of the partially completed consolidation working papers. (In thousands) Required:

a) Prepare the entry made by Philmon Corporation January 1, 2009 and subsequently in 2009 to account for its investment in Sonny

b) Prepare the consolidation/elimination entries for consolidating Philmon and Sonny at December 31, 2009

c) Complete the consolidation worksheet provided below to determine consolidated balances to be reported at December 31, 2009