1. Consolidation with a Non controlling interest (60 points) Assume that, on January 1, 2019, a parent company acquired a 70% interest in its subsidiary for a purchase price of $940,950 and the fair value of the noncontrolling interest is $367,550. On the date of the acquisition, the subsidiary retained earnings is $500,000. The parent assigned the acquisition-date AAP as follows: AAP Items Initial Fair Value Useful Life (years) PPE 400,000 10 On January 1, 2020, the parent sold equipment to the subsidiary for $60,000. The book value the equipment is $50,000 and the equipment has a five year life. On January 1, 2021, the subsidiary sold land to the parent for $70,000. The land had a book valu of $75,000. During 2022, parent sold the land to an outside party for $85,000. Assume that the parent sells inventory to the subsidiary (downstream) which includes that inventor in products that it, ultimately, sells to customers outside of the controlled group. You have compil the following data as of 2021 and 2022: 2021 2022 Transfer price for inventory sale $85,000 $125,000 Cost of goods sold -65,000 -100,000 Gross profit $20,000 $25,000 % inventory remaining 30% 30% Gross profit deferred $6,000 $7,500 EOY Receivable/Payable $18,000 $20,000 The inventory not remaining at the end of the year has been sold outside of the controlled grou The parent and the subsidiary report the following financial statements at December 31, 2022: Income Statement Parent Subsidiary Sales $3,500,000 $600,000 Cost of goods sold -2,800,000 -480.000 Gross Profit 700,000 120,000 Gain on sale of land 15,000 Income (loss) from subsidiary 7,500 Operating expenses -340.000 -65.000 Net income $382.500 $55,000 Statement of Retained Earnings Parent Subsidiary BOY Retained Earnings $5,484,500 $850,000 Net income 382,500 55,000 Dividends -60,000 -18.000 EOY Retained Earnings $5,807.000 $887.000continued Balance Sheet Parent Subsidiary Assets: Cash $780,000 $215,000 Accounts receivable 1,051,600 210,000 Inventory 1,250,000 195,000 Equity Investment 1,088,350 PPE, net 5,773.050 1,400.000 $9,943,000 $2.020,000 Liabilities and Stockholders' Equity: Current Liabilities $751,000 $500,000 Long-term Liabilities 2,070,000 474,500 Common Stock 450,000 42,000 APIC 865,000 116,500 Retained Earnings 5.807,000 887,000 $9.943.000 $2.020,000