Equity investment accounting

Assume on January 1, 2018, a parent company acquired a 75% interest in a subsidiarys voting common stock. On the date of acquisition, the fair value of the subsidiarys net assets equaled their reported book values. On January 1, 2020, the subsidiary purchased a building for $432,000 The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2022, the subsidiary sold the building to the parent for $360,000 The parent estimated that the building had a six-year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. For the year ending December 31, 2022, the parents stand-alone income (i.e., net income before recording any adjustments related to preconsolidation investment accounting) is $450,000 . The subsidiarys recorded net income is $90,000 Based on this information, determine the balance for Income from Equity investment (on parents pre-consolidations books preceding consolidation):

Select one:

a. $73,500

b. $37,500

c. $67,500

d. $45,000