C- On January 1, 2018 Philly Corporation paid $40,500 for a 90% interest in Skelly Corporation. On that date Skelly capital stock was $25,000 and its Retained Earnings was $7,500. Any excess will be assigned to goodwill. Further information: 1. During 2018, Philly's sales to Skelly were $12,000, Skelly managed to sell 50% of this merchandise. (The other half was sold in 2019.) 2. During 2019, Philly's sales to Skelly were $15,000 of which Skelly managed to sell 40% of this merchandise. At year-end 2019, Skelly owed Philly $3,750 for the inventory purchased during 2019. Philly sells merchandise to Skelly at 120% of Philly's cost. 3. On January 1, 2019, Philly sold equipment with a book value of $5,000 and a remaining useful life of four years and no salvage value to Skelly for $7,000. Straight-line depreciation is used. 4. Skelly's income for 2018 was $10,000 and Skelly's dividends received by Philly was $4,500 5. Separate company financial statements for Philly Corporation and Subsidiary at December 31, 2019 are summarized in the first two columns of the consolidation working papers. Required: 2) Complete the working papers to consolidate the financial statements of Philly Corporation and subsidiary for the year ended December 31, 2019.

Philly Skelly Eliminations Consolidated Debit Credit INCOME STATEMENT Sales S 150,000 $35,000 11,500 Income from Skelly Gain on equipment sale 2,000 Cost of Sales (65,000) (11,000) Other Expenses (70,000) |(9,000) Noncontrolling interest share Net income $ 28,500 S 15,000 Retained Earnings 1/1 S 23,750 S 12,500 Add: Net income 28,500 15,000 Dividends ( 17,500) (5,000) Retained Earnings 12/31 $ 34,750 S 22,500 BALANCE SHEET Cash S 13,750 $ 7,500 Receivables 17,500 10,000 Inventories 25,000 11,250 Equipment-net 60,000 22,500 Land 10,000 8,750 Investment in Skelly 51,000 Goodwill TOTAL ASSETS S 177,250 $60,000 LIAB. & EQUITY Accounts payable $ 17,500 $ 12,500 Capital Stock 125,000 25,000 Retained Earnings 34,750 22,500 1/1 Noncntrl. Interest 12/31 Noncntrl. Interest TOTAL LIAB.& EQUITIES $ 177,250 $60,000