Several years ago Pow Company exchanged its own shares for 95 percent of the outstanding stock of Sow Company. At that time, Sow's assets and liabilities were fairly stated and the acquisition cost and fair value of the noncontrolling interest reflected Sow's book value. Condensed income statements for the two companies appear below. Pow uses the equity method to account for its investment in Sow.

Additional information:
1. Pow's beginning inventory includes $400,000 of intercompany profit on goods purchased from Sow, and made no intercompany purchases during the current year. Sow's ending inventory includes $200,000 of intercompany profit on purchases of $3,000,000 from Pow.
2. Sow's other expenses include a loss of $100,000 on an intercompany sale of land to Pow.
3. Pow's other income reflects a $250,000 gain on the sale of machinery to Sow at the beginning of the year. At date of sale, the machinery had a remaining life of five years; it is being depreciated by the straight-line method.
4. Several years ago, Pow recorded a gain of $60,000 on land sold to Sow for $280,000. Sow sold the land externally during the year for $390,000. The current gain is reflected in Sow's other income account.
Required
a. Prepare a schedule to calculate Pow's equity method income accrual and noncontrolling interest in consolidated net income for the year.
b. Prepare a consolidated statement of income and retained earnings for Pow and Sow.

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Pow Company and Sow Company Statements of Income and Retained Earnings Pow Sow $25,000,000 1,200,000 895,000 $10,000,000 Sales Other income.. .^.. 500,000 Cost of goods sold. .. . Operating expenses._. Other expenses . . Total expenses..US. Net income Retained earnings, January 1... Dividends 10,500,000 7,600,000 1,800,000 300,000 9,700,000 800,000 6,200,000 (400,000) $6,600,000 19,000,000 4,100,000 800,000 . . . .、.. 23,900,000 3,195,000 15,700,000 1.000.000)