Condensed income statements for Pon and its 80 percent-owned subsidiary, Star, appear below.

Intercompany profit in Star's ending inventory is $60,000. At the date of combination four years ago, previously unrecorded identifiable intangibles (8-year life, straight-line) of $800,000 were recognized. The total goodwill recognized at date of business combination is shared with the noncontrolling interest according to ownership interests. This year's goodwill impairment test indicates a $200,000 reduction in value.
Required
a. Prepare a schedule to compute Pon's equity method income accrual and the noncontrolling interest in net income.
b. Prepare a condensed consolidated income statement for Pon and Star.

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Condensed Income Statements Pon Star Sales. Equity in income of Star. Cost of goods sold.... Other expenses Net income. ...*n..$1,508,000 $9,000,000 $4,000,000 508,000 2,000,000) (600,000) 900,000