7.The following information pertains to the entity P and consolidated subsidiary S. P has owned 100% of S since 1/1 2018. On that date, S had common stock and retained earnings of $10,000 and $20,000 respectively. The purchase price was $35,000 due to the existence of an undervalued patent with a remaining economic life of 5 years. S net income and dividends since acquisition are reported below. P uses the cost method to account for its investment in S. Compute: 1. Investment income reported under the cost method 2. Investment income reported under the full equity method 3. Adjusrments to 1/1 consolidated retained earnings arising from P's use of the cost method that are needed to bring consolidated 1/1 RE each year to its GAAP value I Year Dividends Cost Income Equity Income Adjustment to 1/1 RE NA 2018 2019 S Net Income 4,000 5,000 6,000 NA 1,000 2,000 3,000 2020 1/1/21 RE adj NA NA NA