A. Compute the Equity Investment balance as of January 1, 2016

Consolidation several years subsequent to date of acquisition-Equity method Assume that a parent company acquired a subsidiary on January 1, 2014. The purchase price was $865,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets: Original Original Useful [A] Asset A] Amount Life Property, plant and equipment (PPE), net $140,000 16 years Patent 245,000 7 years License 105,000 10 years Goodwill 375,000 Indefinite $865,000 The [A] assets with definite useful lives have been depreciated or amortized as part of the parent's preconsolidation equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows: Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $4,802,000 $1,358,300 Assets Cost of goods sold (3,457,300) (784,700) Cash $719,600 $337,400 Gross profit 1,344,700 573,600 Accounts receivable 1,229,200 303,800 Equity income 179,150 Inventory 1,624,000 389,900 Operating expenses (720,300) (340,200) Equity investment 1,730,550 Net income $803,550 $233,400 Property, plant & equipment 2,923,200 721,000 Statement of retained earnings $8,226,550 $1,752,100 BOY retained earnings 1,694,700 676,200 Liabilities and stockholders' equity Net income 803,550 233,400 Accounts payable $702,800 $124,600 Dividends (414,000) (78,000) Accrued liabilities 835,800 163,100 Ending retained earnings $2,084,250 $831,600 Long-term liabilities 2,100,000 436,100 Common stock 527,100 87,500 APIC 1,976,600 109,200 Retained earnings 2,084,250 831,600 $8,226,550 $1,752,100