On January 1, 20XI, Parent Company acquired 80% of the common stock of Subsidiary Company for $750,000.

Question:

On January 1, 20XI, Parent Company acquired 80% of the of Subsidiary Company for $750,000. On this date, Subsidiary had total owners equity of $540,000
Any excess of cost over book value is attributable to land, undervalued $197,500 and to goodwill.
During 20XI and 20X2, Parent has appropriately accounted for its investment in Subsidiary using the simple equity method.
On January 1, 20X2, Parent held merchandise acquired from Subsidiary for $10,000. During 20X2, Subsidiary sold merchandise to Parent for $100,000, of which $20,000 is held by Parent on December 31, 20X2. Subsidiary usual gross profit on affiliated sales is 40%.
On December 31, 20X2, Parent still owes Subsidiary $20,000 for merchandise acquired in December of 20X2.
On January 1, 20X2, Parent sold to Subsidiary some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000, Subsidiary uses the equipment in its business and is depreciating the equipment over a fire year life, assuming no and using the straight line method.
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