Parson Industries purchased 80% of the common stock of Succo Company on January 1, 2010, for $300,000 when Succo Company’s capital consisted of common stock of $200,000, preferred stock of $100,000, other contributed capital of $50,000, and retained earnings of $62,000. The $100 par value preferred is 15%, cumulative and nonparticipating, and has a call price of $104 per share. Dividends on the preferred stock were not paid in 2009.

Trial balances for the parent and subsidiary for the December 31, 2011, year-end are presented below.

Additional Information:
1. At the beginning of 2011, dividends on the preferred stock were in arrears for 2009 and 2010.
2. Succo Company owed Parson Industries $10,000 for purchases of inventory on account.
3. At the date of acquisition, the portion of the difference between the implied and book value interest acquired that was attributed to tangible assets of Succo Company was allocated as follows:
Equipment (net) $12,500 Inventories6,250 Land 6,250 The amount not allocated to tangible assets was allocated to goodwill (excess of implied over fair value). The equipment had a remaining life of 20 years at the date of acquisition.
Succo Company uses the FIFO cost flow assumption in pricing inventory.
4. The building and equipment account of Parson Industries includes $50,000 of equipment acquired from Succo Company on July 1, 2010. When sold to Parson Industries, the asset was carried on the books of Succo Company at a cost of $100,000 and accumulated depreciation of $20,000. The asset is being depreciated by Parson Indus tries over a remaining life of five years. Parson Industries uses the straight-line method of depreciation.
5. The 2010 and 2011 ending inventories of Succo Company included goods purchased from Parson Industries for $15,000 and $25,000, respectively. Parson Industries sells merchandise to Succo Company at 20% above cost. During 2011, such sales amounted to $100,000.
6. The affiliates file consolidated tax returns. Ignore deferred income taxes in the assignment of the difference between implied and book value.

Required:
A. Compute the difference between implied value and book value of Succo Company equity at the date of acquisition and allocate the difference to undervalued assets of Succo Company.
B. Prepare a consolidated statements workpaper for the year ended December 31, 2011.
C. Prepare a schedule showing the calculation of controlling interest in consolidated net income for the year ended December 31,2011.

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Parson Industries Succo Income Statement Company 404,000 Sales Equity Income Cost of Goods Sold Operating Expenses Income Taxes Net Income $300,000 31,433 (200,000) (36,400) (40,200) 158,833 (160,000) (50,000) 27,000) 63,000 Retained Earnings 1/1 Retained Earnings Net Income Less: Dividends Declared 12/31 Retained Earnings 192,000 158,833 (65,000) 285,833 $107,000 63,000 (50,000) 120,000 Balance Sheet Cash and Receivables Inventories Land Buildings and Equipment 396,800 200,000 300,000 697,000 (100,000) 205,000 170,000 120,000 245,000 (70,000) ccumulated Depreciation Investment in Succo Company $092,035 570 000 $1,855,833 Totals Current Liabilities Bonds Pavable Preferred Stock Common Stock, $10 par value Other Contributed Capital Retained Earnings 370,000 400,000 $100,000 100,000 100,000 200,000 50,000 120,000 670.000 600,000 200,000 285,833 Totals