Prather Company owns 80% of the common stock of Stone Company. The stock was purchased for $960,000 on January 1, 2017, when Stone Company?s retained earnings were $675,000. On January 1, 2019, Stone Company sold fixed assets to Prather Company for $960,000; Stone Company had purchased these assets for $1,350,000 on January 1, 2004, at which time their estimated useful life was 25 years. The estimated remaining useful life to Prather Company on 1/1/19 is 10 years. Both companies employ the straight-line method of depreciation.

The financial data for 2020 are presented here:

Required:

A. Prepare a consolidated statements workpaper for the year ended December 31, 2020.

B. Calculate consolidated retained earnings on December 31, 2020, using a t-account or analytical approach.

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Prather Company Stone Company $1,950,000 Sales $1,350,000 Equity in Subsidiary Income 252,000 Total Revenue 2,202,000 1,350,000 Cost of Goods Sold 1,350,000 900,000 Other Expenses 225,000 1,575,000 $ 627,000 150,000 Total Cost and Expense 1,050,000 $ 300,000 Net Income 1/1 Retained Earnings $1,397,400 $1,038,000 Net Income 627,000 300,000 Dividends Declared (150,000) (75,000) 12/31 Retained Earnings $1,874,400 $1,263,000 $ 498,000 $ 225,000 Inventory Investment in Stone Company 1,334,400 Fixed Assets 2,168,100 2,625,000 Accumulated Depreciation-Fixed Assets (900,000) (612,000) $2,238,000 Total Assets $3,100,500 $ 465,600 $ 450,000 Liabilities Common Stock 760,500 525,000 Retained Earnings Total Liabilities and Equity 1,874,400 $3,100,500 1,263,000 $2,238,000