Parsons Company acquired 90% of the outstanding common stock of Shea Company on June 30, 2024, for $426,000. On that date, Shea Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of implied over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Shea Company, which had an expected remaining useful life of five years from June 30, 2024. Financial data for 2026 are presented here:

On December 31, 2024, Parsons Company sold equipment (with an original cost of $100,000 and accumulated depreciation of $50,000) to Shea Company for $97,500. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During 2025 Shea Company sold land to Parsons Company at a profit of $15,000. The inventory of Parsons Company on December 31, 2025, included goods purchased from Shea Company on which Shea Company recognized a profit of $7,500. During 2026, Shea Company sold goods to Parsons Company for $375,000, of which $60,000 was unpaid on December 31, 2026. The December 31, 2026, inventory of Parsons Company included goods acquired from Shea Company on which Shea Company recognized a profit of $10,500.

Required:
A. Prepare a consolidated financial statements workpaper for the year ended December 31, 2026.
B. Prepare a schedule to calculate consolidated retained earnings on December 31, 2026, using an analytical or t- account approach.

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Sales Dividend Income Total Revenue Cost of Goods Sold Expenses Total Cost and Expense Net Income 1/1 Retained Earnings Net Income Dividends Declared 12/31 Retained Earnings Cash Accounts Receivable Inventory Other Current Assets Land Investment in Shea Company Property and Equipment Parsons Company $2,555,500 54,000 2,609,500 1,730,000 654,500 2,384,500 $ 225,000 $ 595,000 225,000 (100,000) $ 720,000 $ 119,500 342,000 362,000 40,500 150,000 426,000 825,000 Shea Company $1,120,000 1,120,000 690,500 251,000 941,500 $ 178,500 $ 139,500 178,500 (60,000) $ 258,000 $ 132,500 125,000 201,000 13,000 241,000