A parent company acquired 100 percent of the stock of a subsidiary company on January 1, 2013, for $800,000. On this date, the balances of the subsidiarys stockholders equity accounts were Common Stock, $50,000, Additional Paid-in Capital, $55,000, and Retained Earnings, $195,000. On the acquisition date, the excess was assigned to the following AAP assets:

					Original Amount		Original Useful Life
Property, plant & equipment					250,000		10	years
Customer list					150,000		8	years
Royalty agreement					130,000		8	years
Goodwill					120,000		Indefinite

The Goodwill asset has been tested annually for impairment, and has not been found to be impaired.

Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2015 and 2016:

	Intercompany Sales		Gross Profit Remaining in Unsold Inventory			Receivable (Payable)
2016	$42,000		$10,000			$30,000
2015	$62,000		$12,500			$17,000

The inventory not remaining at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping.

The financial statements of the parent and its subsidiary for the year ended December 31, 2016, follow:

				Parent		Subsidiary								Parent		Subsidiary
Income statement									Balance sheet
Sales				$4,350,000		$800,000			Assets
Cost of goods sold				(3,050,000)		(480,000)			Cash					$650,000		300,000
Gross profit				1,300,000		320,000			Accounts receivable					560,000		180,000
Income (loss) from subsidiary				15,000		-			Inventory					850,000		250,000
Operating expenses				(830,000)		(200,000)			Equity investment					950,000		-
Net income				485,000		120,000			Property, plant & equipment					4,000,000		420,000
Statement of retained earnings														$7,010,000		$1,150,000
BOY retained earnings				$2,000,000		455,000			Liabilities and stockholders' equity
Net income				485,000		120,000			Accounts payable					$350,000		$100,000
Dividends				(125,000)		(15,000)			Other current liabilities					400,000		125,000
Ending retained earnings				$2,360,000		560,000			Long-term liabilities					2,500,000		260,000
									Common stock					700,000		50,000
									APIC					700,000		55,000
									Retained earnings					2,360,000		560,000
														7,010,000		1,150,000

		Parent		Subsidiary
Income statement
Sales		$4,350,000		$800,000
Cost of goods sold		-3,050,000		-480,000
Gross profit		1,300,000		320,000
Equity income		15,000		-
Operating expenses		-830,000		-200,000
						Net income		$485,000		$120,000
Statement of retained earnings
BOY retained earnings		$2,000,000		$405,000
Net income		485,000		120,000
Dividends		-125,000		-15,000
						Ending retained earnings		$2,360,000		$510,000
Balance sheet
Assets
Cash		$650,000		300,000
Accounts receivable		560,000		180,000
Inventory		850,000		250,000
Equity investment		950,000		-
PPE, net		4,000,000		420,000
Customer List
Royalty Agreement
Goodwill
								7,010,000		1,150,000
Liabilities and equity
Accounts payable		$350,000		$100,000
Other current liabilities		400,000		125,000
Long-term liabilities		2,500,000		260,000
Common stock		700,000		50,000
APIC		700,000		55,000
Retained earnings		2,360,000		560,000
								7,010,000		1,150,000

b. Compute the amount of the beginning of year [ADJ] adjustment necessary for the consolidation of the financial statements for the year ended December 31, 2016.

Do not use negative signs with your answers below.

Change in RE(S) thru BOY
Cumulative AAP amort thru BOY
BOY Upstream IIP
ADJ Amount