A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $875,000 in excess of the subsidiary's Stockholders Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $500,000 and to an unrecorded patent valued at $375,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over an 10-year period, both on the straight-line basis with no salvage valueDuring the current year, the parent and subsidiary reported a total of $1,500,000 of intercompany salesAt the beginning of the current year, there were $100,000 of upstream intercompany profits in the parent's inventory. At the end of the current year, there were $150,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $200,000 of dividends . The parent company uses the equity method of pre-consolidation investment bookkeeping Each company reports the following income statement for the current year

a . Compute the Income ( loss) from subsidiary of \$103,750 reported by the parent company in its preconsolidation income statement.

b. prepare the consolidated income statement for the current year.

Preparing a consolidated income statement-Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $875,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $500,000 and to an unrecorded patent valued at $375,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over an 10-year period, both on the straight-line basis with no salvage value. During the current year, the parent and subsidiary reported a total of $1,500,000 of intercompany sales. At the beginning of the current year, there were $100,000 of upstream intercompany profits in the parent's inventory. At the end of the current year, there were $150,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $200,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement $10,000,000 $2,500,000 Cost of goods sold (6,800,000) (1.500,000) Gross profit 3,200,000 1,000,000 Income (loss) from subsidiary 103,750 Operating expenses (1,800,000) (675,000) $1,503,750 $325,000 Sales Net income a. Compute the income (loss) from subsidiary of $103,750 reported by the parent company in its preconsolidation income statement. a. Compute the income (loss) from subsidiary of $103,750 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income $ 0 0 0 Upstream sales Adjusted subsidiary income P% of interest X $ 0 096 0 0 Downstream sales Income (loss) from subsidiary 5 0 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales Cost of goods sold 0 Gross profit Operating expenses $ 0 0 0 0