I recently had a test and had this extra credit question. I really did not understand how to solve it. Please need help solving this problem.

On January 1, 20XI, Parent Company acquired 80% of the common stock of Subsidiary Company for $750,000. On this date, Subsidiary had total owners equity of $540,000

Any excess of cost over book value is attritbutable to land, undervalued $197,500 and to goodwill.

During 20XI and 20X2, Parent has appropriately accounted for its investment in Subsidiary using the simple equity method.

On January 1, 20X2, Parent held merchandise acquired from Subsidiary for $10,000. During 20X2, Subsidiary sold merchandise to Parent for $100,000, of which $20,000 is held by Parent on December 31, 20X2. Subsidiary usual gross profit on affiliated sales is 40%.

On Dcember 31, 20X2, Parent still owes Subsidiary $20,000 for merchandise acquired in December of 20X2.

On January 1, 20X2, Parent sold to Subsidiary some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000, Subsidiary uses the equipment in its business and is depreciating the equipment over a fire year life, assuming no salvage value and using the straight line method.

***Question

Using this information determine how much Subsidiary Income was recorded byParent Co. in 20X1, assuming Subsidiary Co. declared $5,000 in dividends in 20X1, but issued no additional shares of common stock.(Hint, Parent Co.uses the simple equity method to account for its Investment in Subsidiary Co.Stock.) MUST SHOW ALL YOUR WORK!!!