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Parent 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 $525,000 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 $300,000 and to an unrecorded patent valued at $225,000. The building asset is being depreciated over a 15-year period and the patent 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 $900,000 of intercompany sales. At the beginning of the current year, there were $60,000 of upstream intercompany profits in the parent's inventory. At the end of the current year, there were $90,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $120,000 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: Subsidiary Income statement: Sales $10,000,000 $1,500,000 Cost of goods sold (6.800,000) (900,000) Gross profit 3,200,000 600,000 Income (loss) . from subsidiary 58,750 Operating expenses (1.800.000) Net $1,458,750 $195,000 (405,000 income a. Compute the Income (loss) from subsidiary of $58,750 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers low. Subsidiary's net income $ 195.000 AAP (42.500) X Upstream sales 600,000 X Adjusted subsidiary income $ 752.500 x p% of interest X 70 % 526.750 X Downstream sales 90,000 Income (loss) from subsidiary $ 436.750 X b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 11,500,000 x Cost of goods sold (7.700.000) X Gross profit 3,800,000 x Operating expenses (2.247,500) X Net income 1,552.500 X Net income attributable to noncontrolling interests 225,750 x Net income attributable to the parent $ 526,750 X