P Corporation acquired a 90% interest in S Company for $3,250,000 on January 1 2016. At that time S Company had common stock of $2,250,000 and retained earnings of $900,000. The balance sheet information available for S Company on January 1, 2016, showed the following:

Book Value Fair Value

Inventory (FIFO) $650000 $750,000

Equipment (net) 750,000 950,000

Land 1,500,000 1,500,000

The equipment had a remaining useful life of ten years. S Company reported $120,000 of net income in 2016 and declared $30,000 of dividends during the year.

Required:

Prepare the workpaper entries assuming the cost method is used, to eliminate dividends, eliminate the investment account, and to allocate and depreciate the difference between implied and book value for 2016.