Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest, AAP, and gain on downstream intercompany equipment sale A parent company acquired its 80% interest in its subsidiary on January 1, 2015. The total fair value of the controlling interest and the noncontrolling interest on that date was $300,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. $200,000 of that excess was assigned to a Customer List that is being amortized over a 10 year period. The remaining $100,000 was assigned to Goodwill. The Goodwill is allocated to the parent and subsidiary in an 80:20 split, respectively. On January 1, 2018, the parent sold Equipment to the subsidiary for a cash price of $125,000. The parent originally acquired the equipment at a cost of $150,000 and depreciated the equipment over its 15-year useful life using the straight-line method (no salvage value). At the time of the intercompany sale, the parent depreciated the equipment for 5 full years. The subsidiary retained the depreciation policy of the parent (i.e., it depreciated the equipment over its remaining 10-year useful life). The parent uses the equity method of pre-consolidation investment bookkeeping. Following are pre-consolidation financial statements of the parent and its subsidiary for the year ended December 31, 2019. Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales..... Cost of goods sold Gross profit... $9,000,000 $1,100,000 (7,200,000) (650,000) Cash.. $900,000 $ 300,000 Accounts receivable. 1,200,000 400,000 1,800,000 450,000 Inventories.. 1,600,000 500,000 Income (loss) from subsidiary... Operating expenses. Net income. Statement of retained earnings: Beginning retained earnings.... Net income 106,500 (1,400,000) (300,000) Property, plant, & equipment, net. Equity investment.. 5,000,000 1,000,000 936,000 $ 506,500 $ 150,000 Total assets $9,636,000 $2,200,000 $1,029,500 $610,000 Accounts payable... $1,000,000 $ 175,000 Dividends 506,500 (300,000) 150,000 Other current liabilities 1,100,000 230,000 (60,000) Long-term liabilities. 3,500,000 800,000 Ending retained earnings. $1,236,000 $ 700,000 Common stock. 800,000 125,000 Additional paid-in capital. 2,000,000 170,000 Retained earnings. 1,236,000 700,000 Total liabilities and equity. $9,636,000 $2,200,000