5 On January 1, 2020, Pinnacle Corporation exchanged $3,570,500 cash for 100 percent of the outstanding voting stock of Strata Corporation. On the acquisition date, Strata had the following balance sheet: $ 20 points Cash Accounts receivable Inventory Buildings (net) Licensing agreements Total assets $ 101,000 336,000 414,000 1,910,000 3,135,000 $ 5,896,000 Accounts payable Long-term debt Common stock Retained earnings 391,000 2,750,000 1,500,000 1,255,000 8 02:58:48 Total liabilities and equity $ 5,896,000 eBook Pinnacle prepared the following fair-value allocation: Print $ 3,570,500 2,755,000 $ 815,580 Fair value of Strata (consideration transferred) Carrying amount acquired Excess fair value to buildings (undervalued) to licensing agreements (overvalued) to goodwill (indefinite life) $ 492,000 (104,000) References 388,000 427,500 At the acquisition date, Strata's buildings had a 10-year remaining life and its licensing agreements were due to expire in 5 years. On December 31, 2021, Strata's accounts payable included an $88,200 current liability owed to Pinnacle. Strata Corporation continues its separate legal existence as a wholly owned subsidiary of Pinnacle with independent accounting records. Pinnacle employs the initial value method in its internal accounting for its investment in Strata. The separate financial statements for the two companies for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses Sales Cost of goods sold Interest expense Depreciation expense Amortization expense Dividend income Net income Retained earnings 1/1/21 Net Income Dividends declared Retained Earnings 12/31/21 Cash Accounts receivable Inventory Investment in Strata Buildings (net) Licensing agreements Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/21 Total Liabilities and Owner's equity Pinnacle Strata $ (7,757,000) $ (3,227,000) 5,840,000 1,745,000 299,000 190,000 633,000 434,000 627,000 (45,000) $ (1,830,000) $ (231,000) $ (5,280,000) $ (1,537,400) (1,830,000) (231,000) 500,000 45,000 $ (6,610,000) $ (1,723,400) $ 242,000 545,400 1,100,000 362,000 1,430,000 1,585,000 3,570,500 5,910,000 1,995,000 1,881,000 442,500 $ 12,695,000 $ 6,368,400 (325,000) (725,000) (2,760,000) (2,420,000) (3,000,000) (1,500,000) (6,610,000) (1,723,400) $ (12,695,000) $ (6,368,400) Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the following amounts that would appear on Pinnacle's 2021 separate (nonconsolidated) financial records if Pinnacle's investment accounting was based on the equity method. (Input all amounts as positive values.) Amounts 1 Subsidiary income 2 Retained earnings 1/1/21 3 Investment in Strata Complete this question by entering your answers in the tabs below. Required A Required B Required C What effect does the parent's internal investment accounting method have on its consolidated financial statements? Effect of parent's internal investment accounting method