Pitts Company owns 80% of the common stock of Shannon Company. The stock was purchased for $960,000 on January 1, 2009, when Shannon Company’s retained earnings were $675,000. On January 1, 2011, Shannon Company sold fixed assets to Pitts Company for $960,000; Shannon Company had purchased these assets for $1,350,000 on January 1, 2001, at which time their estimated useful life was 25 years. The estimated remaining useful life to Pitts Company on 1/1/11 is 10 years. Both companies employ the straight-line method of depreciation. The financial data for 2012 are presented here:

Required:
A. Prepare a consolidated statements workpaper for the year ended December 31, 2012.
B. Calculate consolidated retained earnings on December 31, 2012, using an analytical or t-accountapproach.

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Pitts Company Shannon Combany 1,950,000 60,000 2,010,000 1,350,000 225,000 1,575,000 435.000 Sales Dividend Income $1,350,000 Total Revenue Cost of Goods Sold Other Expenses 1,350,000 900,000 150.000 1,050,000 300,000 Total Cost and Expense Net Income 1/1 Retained Earnings Net Income Dividends Declared 12/31 Re $1,215,000 435,000 (150,000) $1,500,000 1,038,000 300,000 (75,000) $1,263,000 tained Earnings 498,000 960,000 2,168,100 (900,000) 225,000 Inventory Investment in Shannon Company Fixed Assets Accumulated Depreciation- Fixed Assets Total Assets 2,625,000 (612,000) 2,238,000 Liabilities Common Stock Retained Earnings Total Liabilities and Equity 465,600 760,500 1,500,000 $2,726,100 450,000 525,000 1,263,000 2,238,000