Parson Industries purchased 80% of the common stock of Succo Company on January 1,2001, 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 2000.

Trial balances for the parent and subsidiary for the December 31, 2008, year-end are presented below.

Income statement	Parson Industries	Succo Company
Sales	$404,000	$300,000
Dividend Income	4000
Cost of Goods Sold	(200,000)	(160,000)
Operating Expenses	(36,400)	(50,000)
Income Taxes	(40,200)	(27,000)
Net Income	$131,400	$63,000

Retained Earnings	Parson Industries	Succo Company
1/1 Retained Earnings	$157,400	$107,000
Net Income	$131,400	$63,000
Less: Dividends Declared	(65,000)	(50,000)
12/31 Retained Earnings	$223,800	$120,000

Balance Sheet
Cash and Receivables	$396,800	$205,000
Inventories	200,000	170,000
Land	300,000	120,000
Buildings and Equipment	697,000	245,000
Accumulated Depreciation	(100,000)	(70,000)
Investment in Succo Company	300,000
Totals:	$1,793,800	$670,000
Current Liabilities	$370,000	$100,000
Bonds Payable	400,000	100,000
Preferred Stock		100,000
Common Stock, $10 par value	600,000	200,000
Other Contributed Capital	200,000	50,000
Retained Earnings	223,800	120,000
Totals	$1,793,800	$670,000

Additional Information:

1. At the beginning of 2008, dividends on the preferred stock were in arrears for 2006 and 2007.
2. Succo Company owed Parson Industries $10,000 for purchases of inventory on account.
3. At the date of aquisition, the portion of the difference between the implied value and book value of Succo that was attributed to tangible assets of Succo Company was allocated as follows:

Equipment (net): $10,000

Inventories: $5,000

Land: $5,000

4. The building and equipment account of Parson Industries includes $50,000 of equipment acquired from Succo Company on July 1, 2007. 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 industries over a remaining life of five years. Parson industries uses the straight-line method of depreciation.

5. The 2007 and 2008 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 2008, 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 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, 2008.

C. Prepare Journal Entries