Parsons Company acquired 90% of the outstanding common stock of Shea Company on June 30, 2019, 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, 2019.

Financial data for 2021 are presented here:

	Parsons Company	Shea Company
Sales	$2,555,500	$1,120,000
Dividend Income	54,000
Total Revenue	2,609,500	1,120,000
Cost of Goods Sold	1,730,000	690,500
Expenses	654,500	251,000
Total Cost and Expense	2,384,500	941,500
Net Income	$ 225,000	$ 178,500
1/1 Retained Earnings	$ 595,000	$ 139,500
Net Income	225,000	178,500
Dividends Declared	(100,000)	(60,000)
12/31 Retained Earnings	$ 720,000	$ 258,000
Cash	$ 119,500	$ 132,500
Accounts Receivable	342,000	125,000
Inventory	362,000	201,000
Other Current Assets	40,500	13,000
Land	150,000
Investment in Shea Company	426,000
Property and Equipment	825,000	241,000
Accumulated Depreciation	(207,000)	(53,500)
Total Assets	$2,058,000	$ 659,000
Accounts Payable	$ 295,000	$32,000
Other Liabilities	43,000	19,000
Capital Stock	1,000,000	300,000
Additional Paidin Capital		50,000
Retained Earnings	720,000	258,000
Total Liabilities and Equity	$2,058,000	$ 659,000

On December 31, 2019, 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 2020 Shea Company sold land to Parsons Company at a profit of $15,000.

The inventory of Parsons Company on December 31, 2020, included goods purchased from Shea Company on which Shea Company recognized a profit of $7,500. During 2021, Shea Company sold goods to Parsons Company for $375,000, of which $60,000 was unpaid on December 31, 2021. The December 31, 2021, inventory of Parsons Company included goods acquired from Shea Company on which Shea Company recognized a profit of $10,500.

Required:

1. Prepare a consolidated financial statements workpaper for the year ended December 31, 2021.
2. Prepare a schedule to calculate consolidated retained earnings on December 31, 2021, using an analytical or taccount approach. (Hint: Due to rounding, you may be out of balance by $1. To avoid this, you should carry decimals until the final calculation.)