P Company purchased 80% of the outstanding common stock of S Company on May 1, 2011, for a cash payment of $1,272,000. S Companys December 31, 2010 balance sheet reported common stock of $800,000 and retained earnings of $540,000. During the calendar year 2011, S Company earned $840,000 evenly throughout the year and declared a dividend of $300,000 on November 1. What is the amount needed to establish reciprocity 5under the cost method in the preparation of a consolidated workpaper on December 31, 2011?

A) $432,000 B) $248,000 C) $260,000 D) $208,000

Be sure to fully explain your choice.