Assume, on January 1, 2013, a parent company acquired a 75% interest in a subsidiary for $900,000 in cash. The total fair value of the controlling and noncontrolling interests on the acquisition date was $1,200,000, which is $540,000 over the book value of the subsidiarys Stockholders Equity on the acquisition date. The parent assigned the excess to the following [A] assets:

[A] Asset	Initial Fair Value	Useful Life
Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$240,000	10 years
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	300,000
	$540,000

On the acquisition date, the retained earnings of the subsidiary were $220,000. The acquisition-date Good will is allocated to the parent and subsidiary in a 75:25 proportion, respectively. Assume the subsidiary sells inventory to the parent (upstream) which includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2018 and 2019:

The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the cost method of pre-consolidation investment bookkeeping. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019:

a. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary.

b. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income.

c. Complete the ADJ and C consolidating entries only.

2018 2019 Transfer price for inventory sale Cost of goods sold Gross profit. % Inventory remaining Gross profit deferred. EOY receivable payable $800,000 (680,000) $120,000 3090 $36,000 $120,000 $700,000 (620,000) 80,000 40% 32,000 70,000 Income statement Sales Cost of goods sold Gross profit Balance sheet $5.700,000 $2,000,000 Cash (3,500,000) 1,200,000) Accounts receivable 5500.000 700,000 900,000 900,000 S 350,000 550,000 700,000 2,200.000 800,000 Equity investment Income (loss) from subsidiary Operating expenses Net income 1,600.000) (60,000) Property, plant and $ 660,000 200,000 equipment(. net 3.40U,UUO S.400,000 $2,500,000 Statement of retained earnings: Beginning retained earnings Net income $340,000 440,000 Current liabilities $1,300,000 S 800,000 700,000 140,000 300,000 560,000 S.400,000 $2,500,000 860,000 (200,000) 200,000 Long-term liabilities (80,000) Common stock un 2,800,000 300,000 1,200,000 800,000 Ending retained earnings $800,000 50,000 Additional paid-in capital