40. Prepare consolidation spreadsheet for continuous sale of inventory-Equity method Assume a parent company acquired 100% of a subsidiary January 1, 2017. The purchase price was $210,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned entirely to an unrecorded Patent owned by the subsidiary. The assumed eco- nomic useful life of the Patent is 5 years. Assume the wholly owned subsidiary sells inventory to the parent. The parent, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2018 and 2019: Inventory Sales Gross Profit Remaining in Unsold Inventory Receivable (Payable) 2019..... $120,000 $108,000 $36.000 $21,600 $48,000 $36,000 2018... The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment. The financial statements of the parent and its subsidiary for the year ended 2019 follows: Parent Subsidiary Parent Subsidiary Income statement: Sales.... Cost of goods sold ...... Gross profit. ................ Income (loss) from subsidiary...... Operating expenses............. Net Income...... $1,800,000 (1.104,000) 696,000 $9,840,000 (6,840,000) 3,000,000 159,600 (1.719,600) $1,440,000 Balance sheet: Assets Cash.... Accounts receivable............ Inventory...... . . Building, net... . Equity investment...... $ 660,000 1,320,000 1,500,000 4,800,000 684,000 $8,964.000 $360,000 228,000 420.000 912,000 (480,000) $ 216,000 $1,920,000 Statement of retained earnings: Beginning retained earnings. ...... Net income..... . Dividends .... .. .. Ending retained earnings ......... $2,200,000 1.440,000 (600,000) $3,120,000 $ 180,000 210,000 (36,000) $ 300,000 Liabilities and stockholders' equity Accounts payable.............. Other current abilities .......... Long-term liabilities. ......... Common stock APIC... Retained earnings ........ $ 732.000 912,000 2,400,000 600,000 1,200,000 3,120,000 $8,964,000 $ 252,000 312,000 720,000 120,000 156,000 360,000 $1.920,000 a. Show the computation to yield the pre-consolidation $159,600 Income (loss) from subsidiary reported by the parent during 2019. b. Show the computation to yield the $684,000 Equity Investment account balance reported by the parent at December 31, 2019. c. Prepare the consolidation entries for the year ended December 31, 2019