Assume that, on January $1,2$XX$1,$ Kylar Company acquired an $80\%$ interest in Bright Company for a purchase price that was $$1,625,000$ over the book value of the subsidiary$$s Stockholders$$ Equity on the acquisition date. Kylar uses the equity method to account for its investment in Bright. Kylar assigned the acquisition$-$date AAP as follows:

AAP Item

Initial Fair Value

Useful Life $($years$)$

PPE

$$875,000$

$10$

Patent

$250,000$

$5$

Customer List

$375,000$

$5$

Goodwill

$125,000$

Indefinite

$$1,625,000$

$80\%$ of if the Goodwill is allocated to the parent. Kylar and Bright report the following financial statements December $31,2$XX$4$:

Kylar

Bright

Income Statement

Sales

$$2,150,000$

$$1,875,000$

Cost of goods sold

$(1,145,000)$

$(1,075,000)$

Gross Profit

$1,005,000$

$800,000$

Income $($loss$)$ from subsidiary

$140,000$

Operating expenses

$(395,000)$

$(412,500)$

Net income

$750,000$

$387,500$

Statement of Retained Earnings

BOY Retained Earnings

$2,196,100$

$1,050,000$

Net income

$750,000$

$387,500$

Dividends

$(437,500)$

$(31,250)$

EOY Retained Earnings

$2,508,600$

$1,406,250$

Balance Sheet

Assets:

Cash

$137,500$

$135,000$

Accounts receivable

$115,000$

$60,000$

Inventory

$237,500$

$237,780$

Equity Investment

$2,332,200$

PPE, net

$720,150$

$4,682,970$

$3,542,350$

$5,115,750$

Liabilities and Stockholders$$ Equity:

Current Liabilities

$187,500$

$1,000,500$

Long$-$term Liabilities

$375,000$

$1,975,000$

Common Stock

$158,750$

$295,250$

APIC

$312,500$

$438,750$

Retained Earnings

$2,508,600$

$1,406,250$

$$3,542,350$

$$5,115,750$

Required

a$.$ Compute the EOY noncontrolling interest equity balance. $

Answer $1$

b$.$ Prepare the consolidation income statement.

Note: Use negative signs with answers as appropriate.

Consolidated Income Statement

Sales

Answer $2$

Cost of goods sold

Answer $3$

Gross Profit

Income $($loss$)$ from subsidiary

Answer $4$

Operating expenses

Answer $5$

Net income

Consolidated NI attributable to NCI

Answer $6$

Consolidated NI attributable to Controlling Interests