In 2018, BCL established a wholly owned subsidiary, PCL Limited, with an initial investment of $20,000,000. BCL is anappliance manufacturer. BCL established PCL as a retail chain to sell BCL's appliances under several different brand names, as well as some lines of kitchen appliances imported. Both BCL and PCL are Kenyan companies.

The separate-entity statements of income and retained earnings for the year ended December 31, 2017 are shown in Exhibit A. The balance sheets for December 31, 2017 are shown in Exhibit B. Additional information is as follows:

During 2017, PCL purchased merchandise from BCL for a total price of $1,400,000. BCL's cost of goods sold for this merchandise was $1,100,000.

PCL sold all the merchandise to unrelated customers for $2,100,000.

At year-end 2017, PCL owed $200,000 to BCL for merchandise purchases. 3. On December 17, 2017, PCL's board of directors declared dividends of $100,000, payable on January 10, 2008.

On July 1, 2017, PCL borrowed $1,000,000 from Brad, interest to be paid annually at a rate of 6% per annum.

BCL uses the cost method for recording the investment in PCL Limited.

EXHIBIT A

Statements of Earnings and Retained Earnings Year Ended December 31, 2017 (000 omitted)

BCL CompanyPCL Ltd.

Sales revenue$ 7,100$ 3,400

Other income235840

Total revenue7,3354,240

Operating expenses:

Cost of goods sold4,1751,900

Selling expenses435560

General and administrative expenses995770

Interest and other expenses1,01530

Total operating expenses6,6203,260

Earnings before income taxes715980

Income tax expense215290

Net earnings500690

Retained earnings, December 31, 201639,5006,410

Dividends declared(160)(100)

Retained earnings, December 31, 2017$39,840$ 7,000

EXHIBIT B Balance Sheets December 31, 2017 (000 omitted)

BCLPCL Ltd.

Assets

Cash and temporary investments$ 1,500$ 450

Current receivables and accrued expenses3,4001,890

Inventories10,6405,210

Current assets15,5407,550

Loan receivable1,000-

Land18,000-

Buildings and equipment (net)37,70022,450

Investment in PCL Limited20,000-

Total assets$ 92,240$30,000

Liabilities and shareholders' equity

Current payables and accrued liabilities$ 2,820$1,540

Income tax payable18085

Current liabilities3,0001,625

Long-term debt payable33,7501,000

Future income tax2,650375

Total liabilities39,4003,000

Common shares13,00020,000

Retained earnings39,8407,000

Total shareholders' equity52,84027,000

Total liabilities and shareholders' equity$ 92,240$ 30,000

REQUIRED:

Prepare a consolidated balance sheet at December 31, 2017, and a consolidated statement of income and retained earnings for the year then ended.