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:

Complete the working papers to consolidate the financial statements of Philly Corporation and subsidiary for the year ended December 31, 2019.

Philly Skelly Consolidated Eliminations Debit Credit S 150,000 $35,000 11,500 2,000 (65,000) (11,000) (70.000) 0.000) INCOME STATEMENT Sales Income from Skelly Gain on equipment sale Cost of Sales Other Expenses Noncontrolling interest share Net income Retained Earnings 1/1 Add: Net income Dividends Retained Earnings 12/31 BALANCE SHEET $ 28,500 S 15,000 S 23,750 S 12,500 28,500 15,000 ( 17,500) (5,000) $ 34,750 S 22,500 S 13,750 $ 7,500 17,500 10,000 25,000 11.250 60.000 22,500 10.000 8.750 51.000 Cash Receivables Inventories Equipment-net Land Investment in Skelly Goodwill TOTAL ASSETS LIAB. & EQUITY Accounts payable Capital Stock Retained Earnings 1/1 Noncntri. Interest 12/31 Noncntrl. Interest TOTAL LIAB.& EQUITIES S 177,250 $60,000 $ 17,500 $ 12,500 125,000 25,000 34,750 22,500 $ 177,250 $60,000