8-Parent purchased Subsidiary on January 1, 2020. The excess of investment cost over book value of $350,000 was allocated entirely to a 7-year royalty agreement. The parent uses the equity method to account for its investment in its subsidiary. Subsidiary regularly sells merchandise to Parent. In 2021, inter-company sales amounted to $82,400, with $216,480 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $16,000. In 2022, inter-company sales amounted to $75,000 with $37,500 of deferred profit remaining in ending inventory. Year-end inter- company receivables/payables amounted to $28,000. Financial statements of Parent and Subsidiary for the year ended December 31, 2022 are presented below. Parent Parent Sales Revenue $7,500,000 Cost of Goods Sold -5,930,000 Gross Profit 1,570,000 Operating Expenses -1,375,000 Equity Income 142,980 Net Income $337,980 Retained Earnings, 1/1/22 $4,045,000 Net income 337,980 Dividends -85,000 Retained Earnings, 12/31/22 $4,297,980 Cash and receivables $1,750,000 Inventory 958,000 Equity Investment 2,530,000 Property, Plant & Equipment (Net) 4,562,980 Total Assets $9,800,980 Accounts payable $980,000 Accrued liabilities 142,800 Notes payable 1,010,200 Common stock 1,792,000 Additional paid-in capital 1,578,000 Retained Earnings, 12/31/22 4,297,980 Total Liabilities and Equities $9,800,980 Required: a. Prepare a schedule showing the computation of Income (loss) from subsidiary on Parent's pre-consolidation books for 2022. b. Prepare a schedule showing the computation of Equity Investment on Parent's pre-consolidation books at December 31, Accrued liabilities 142,800 Notes payable 1,010,200 Common stock 1,792,000 Additional paid-in capital 1,578,000 Retained Earnings, 12/31/22 4,297,980 Total Liabilities and Equities $9,800,980 Required: a. Prepare a schedule showing the computation of Income (loss) from subsidiary on Parent's pre-consolidation books for 2022. b. Prepare a schedule showing the computation of Equity Investment on Parent's pre-consolidation books at December 31, 2022. c. Prepare the consolidation entries for 2022. 8-Parent purchased Subsidiary on January 1, 2020. The excess of investment cost over book value of $350,000 was allocated entirely to a 7-year royalty agreement. The parent uses the equity method to account for its investment in its subsidiary. Subsidiary regularly sells merchandise to Parent. In 2021, inter-company sales amounted to $82,400, with $216,480 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $16,000. In 2022, inter-company sales amounted to $75,000 with $37,500 of deferred profit remaining in ending inventory. Year-end inter- company receivables/payables amounted to $28,000. Financial statements of Parent and Subsidiary for the year ended December 31, 2022 are presented below. Parent Parent Sales Revenue $7,500,000 Cost of Goods Sold -5,930,000 Gross Profit 1,570,000 Operating Expenses -1,375,000 Equity Income 142,980 Net Income $337,980 Retained Earnings, 1/1/22 $4,045,000 Net income 337,980 Dividends -85,000 Retained Earnings, 12/31/22 $4,297,980 Cash and receivables $1,750,000 Inventory 958,000 Equity Investment 2,530,000 Property, Plant & Equipment (Net) 4,562,980 Total Assets $9,800,980 Accounts payable $980,000 Accrued liabilities 142,800 Notes payable 1,010,200 Common stock 1,792,000 Additional paid-in capital 1,578,000 Retained Earnings, 12/31/22 4,297,980 Total Liabilities and Equities $9,800,980 Required: a. Prepare a schedule showing the computation of Income (loss) from subsidiary on Parent's pre-consolidation books for 2022. b. Prepare a schedule showing the computation of Equity Investment on Parent's pre-consolidation books at December 31, Accrued liabilities 142,800 Notes payable 1,010,200 Common stock 1,792,000 Additional paid-in capital 1,578,000 Retained Earnings, 12/31/22 4,297,980 Total Liabilities and Equities $9,800,980 Required: a. Prepare a schedule showing the computation of Income (loss) from subsidiary on Parent's pre-consolidation books for 2022. b. Prepare a schedule showing the computation of Equity Investment on Parent's pre-consolidation books at December 31, 2022. c. Prepare the consolidation entries for 2022
