Assume a parent company acquired a subsidiary on January 1, 2018. The purchase price was $880,000 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: [A] Asset Property, plant and equipment (PPE), net Patent Goodwill The parent company uses the cost method of pre-consolidation Equity Investment bookkeeping. The Goodwill asset has been tested annually for impairment and has not been found to be impaired. Selected accounts from the parent, subsidiary, and consolidated financial statements for the year ended December 31, 2022, are as follows: Parent Subsidiary Consolidated Income statement Sales Cost of goods sold Gross profit Investment income Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Original Amount Original Useful Life 17 years $272,000 288,000 12 years 320,000 Indefinite $880,000 Dividends Ending retained earnings $6,000,000 $1,320,000 (3,600,000) (712,000) 2,400,000 608,000 80,000 7,320,000 (4,312,000) 3,008,000 (1,120,000) (400,000) (1,560,000) $1,360,000 $208,000 $1,448,000 1,600,000 672,000 1,792,000 1,360,000 208,000 1,448,000 (160,000) (80,000) (160,000) $2,800,000 $800,000 $3,080,000 Balance sheet Assets Cash Accounts receivable Inventory Equity investment Property, plant & equipment, net Patent Goodwill Liabilities and stockholders' equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC Retained earnings 640,000 336,000 960,000 304,000 1,520,000 392,000 1,408,000 4,800,000 728,000 976,000 1,264,000 1,912,000 5,720,000 168,000 320,000 $9,328,000 $1,760,000 $10,360,000 720,000 120,000 1,072,000 192,000 3,200,000 440,000 576,000 88,000 960,000 120,000 2,800,000 800,000 $9,328,000 $1,760,000 840,000 1,264,000 3,640,000 576,000 960,000 3,080,000 $10,360,000 c. For the year ended December 31, 2022, reconcile the parent company's pre-consolidation net income of $1,360,000 to the consolidated balance of $1,448,000. Do not use negative signs with your answers. $ Parent Income (cost method) Deduct: p% of subsidiary dividends Add: p% of subsidiary net income Dedup% of AAP amortization for year Parent Income (equity method) $0 + + $ d. What was the subsidiary's retained earnings balance on the acquisition date? You should assume the Common Stock and APIC have not changed since the acquisition date. (Hint: You will need to use an account that does not change after the acquisition date.) X 0 x 0 x 0 x 0 x 0 x f. Provide the consolidation entries for the year ending December 31, 2022. Consolidation Journal [ADJ] Equity investment [C] [E] [A] [D] Description BOY Retained Earnings - Parent Investment income Dividends Common Stock APIC BOY Retained Earnings - Subsidiary Equity investment PPE, net Patent Goodwill Equity investment Operating expenses PPE, net Patent Debit 0 x 0 0 x 0 0 x 0 x 0 x 0 0 x 0 x 0 x 0 0 x 0 0 Credit 0 0 x 0 0 x 0 0 < < 0 0 x 0 0 0 0 x 0 0 x 0 x >