Primadonna Company acquired 75 percent of the stock of Slacks Inc. on January 1, 2015, for $280,000. On this date, the balances of Slacks stockholders equity accounts were Common Stock, $195,000, and Retained Earnings, $45,000. As of that date, the fair market value for the 25% of shares not purchased by Primadonna was $90,000.

On January 1, 2015, Slacks recorded book values were equal to fair values for all items except four: (1) accounts receivable had a book value of $55,000 and a fair value of $48,000, (2) property, plant & equipment, net, had a book value of $150,000 and a fair value of $168,000, (3) a previously unrecorded customer list intangible asset had a book value of $0 and a fair value of $30,000, and (4) notes payable had a book value of $30,000 and a fair value of $25,000. Both companies use the FIFO inventory method and sell all of their inventories at least once a year. The year-end net balance of accounts receivables are collected in the following year. On the acquisition date, Slacks PP&E, net had a remaining life of 10 years, the customer list had a remaining life of four years, and the note payable had a remaining term of five years.

On January 1, 2018, Primadonna sold a building to Slacks for $80,000. On this date, the building was carried on Primadonnas books at a cost of $100,000 with accumulated depreciation of $45,000. Both companies estimated that the building has a remaining life of 10 years on the intercompany sale date, with no salvage value.

Each company routinely sells merchandise to the other company, with a profit margin of 40 percent of selling price (regardless of the direction of the sale). During 2019, intercompany sales amount to $50,000, of which $20,000 remains in the ending inventory of Slacks. On December 31, 2019, $10,000 of these intercompany sales remain unpaid. Additionally, Primadonnas December 31, 2018 inventory includes $15,000 of merchandise purchased in the preceding year from Slacks. During 2018, intercompany sales amount to $40,000, and on December 31, 2018, $8,000 of these intercompany sales remain unpaid.

Primadonna accounts for its investment in Slacks using the equity method. Unconfirmed profits are allocated pro-rata.

REQUIRED: prepare the consolidated financial statements: Income Statement; Statement of Retained Earnings; Balance Sheet. show journal entries involved in prepare statements

Debits	Primadonna	Slacks
Cash	$58,080	$42,500
Accounts receivable	81,000	60,000
Inventories	195,000	91,500
Property, plant & equipment, net	189,000	135,000
Other assets	85,500	150,000
Investment in Slacks	325,500	--
Cost of goods sold	432,000	162,000
Depreciation & amortization expense	18,000	14,400
Operating expenses	226,000	54,100
Interest expense	8,000	3,500
Dividends	90,000	21,000
Total debits	$1,708,080	$734,000
Credits
Accounts payable	$168,000	$35,000
Notes payable	80,980	30,000
Other liabilities	33,000	39,000
Common stock	360,000	195,000
Retained earnings (Jan. 1, 2019)	322,200	165,000
Sales	720,000	270,000
Equity income (loss) from Slacks	23,900	--
Total credits	$1,708,080	$734,000