Problem 7-15 LO5, 7 Shown below are selected ledger accounts from the trial balance of a parent and its subsidiary as of December 31, Year 10. P Co. S Co. Investment in bonds of P $ $38,000 Investment in shares of S (equity method) 158,899 Sales 687,000 416,000 Interest income 2,000 Equity method income 125,763 Gain on sale of land 7,000 Common shares 300,000 100,000 Retained earnings, beginning of year 78,000 48,000 Bonds payable 8% 199,000 Cost of sales 412,200 249,600 Interest expense 16,500 Selling and administrative expense 48,000 24,000 Income tax expense 15,000 9,690 Dividends 10,000 8,000 Additional Information P Company purchased its 90% interest in S Company in Year 2, on the date that S Company was incorporated, and has followed the equity method to account for its investment since that date. . On April 1, Year 6, land that had originally cost $21,000 was sold by S Company to P Company for $28,000. P purchased the land with the intention of developing it, but in Year 10 it decided that the location was not suitable and the land was sold to a chain of drug stores. On January 1, Year 3, P Company issued $200,000 face value bonds due in 10 years. Page 425 The proceeds from the bond issue amounted to $195,000. On July 1, Year 10, S Company purchased $40,000 of these bonds on the open market at a cost of $38,000. Intercompany bondholding gains (losses) are allocated between the two affiliates. S Company had $ 76,000 in sales to P Company during Year 10. Use income tax allocation at a 40% tax rate. Required (a) Prepare a consolidated income statement for Year 10. (b) Prepare a consolidated statement of retained earnings for Year 10