On December 31, 2017, Parent Company purchased 75% of the outstanding common shares of Subsidiary Company for $6.0 million in cash. On that date, the shareholders' equity of Subsidiary totaled $6 million and consisted of $1 million in no par common shares and $5 million in retained earnings. Both companies use the straight-line method to calculate depreciation and amortization. The statement of financial position for Subsidiary is provided below at December 31, 2017. December 31, 2017 Fair Values $ Assets Cash Accounts Receivable Inventory Land Buildings & Equipment (net) Total Assets 300,000 900,000 600,000 1,100,000 4,200,000 7,100,000 300,000 850,000 690,000 1,400,000 4,900,000 Liabilities Accounts Payables Long-term Notes Payables 200,000 900,000 1,100,000 200,000 1,020,000 Common Shares Retained Earnings 1,000,000 5,000,000 6,000,000 Total Liabilities & Shareholders' Equity 7,100,000 For the year ending December 31, 2021, the statements of comprehensive income for Parent and Subsidiary were as follows: Subsidiary Parent Sales & Other Revenues Cost of Goods Sold Gross Profit 12,980,000 8,000,000 4.980,000 7,045,600 4,000,000 3,045,600 Less: Operating Expenses Depreciation Expense Other Expenses Income tax expense Net Income 1,500,000 1,800,000 480,000 1,200,000 1,000,000 1,200,000 241,600 604,000 At December 31, 2021, the condensed statements of financial position for the two companies were as follows: Parent Subsidiary Assets Cash Accounts Receivable Receivable from Parent Inventory 1,600,000 2,100,000 400,000 1,100,000 300,000 700,000 2,500,000 1,500,000 5,200,000 Land Buildings & Equipment (net) Investment in Subsidiary 2,600,000 4,900,000 11,000,000 12,800,000 6,000,000 29,800,000 35,000,000 Total Assets 7,500,000 10,000,000 300,000 Liabilities Accounts Payables Payable to Subsidiary Long-term Notes Payables 5,900,000 300,000 5,100,000 11,300,000 876,000 1,176,000 Shareholders' Equity Common Shares Retained Earnings 12,100,000 11,600,000 23,700,000 1,000,000 7,824,000 8,824,000 10,000,000 Total Liabilities & Shareholders' Equity 35,000,000 ADDITIONAL INFORMATION: 1. On December 31, 2017, the Subsidiary's buildings had and an estimated remaining useful life of 20 years. 2. On December 31, 2017, Subsidiary had a trademark that had a fair value of $60,000. The trademark has an expected useful life of five years. 3. The long-term note payable was paid off December 31, 2020. 4. On October 25, 2021, Parent sold a parcel of land to Subsidiary for $800,000. The carrying value of the land at the time of the sale was $600,000. 5. During 2020, Subsidiary sold merchandise to Parent for $150,000, a price that included a gross profit of $50,000. During 2020, 40% of this merchandise was resold by Parent and the other 60% remained in its December 31, 2020, inventories. 6. On December 31, 2021, the inventories of Parent contained merchandise purchased from Subsidiary on which Subsidiary had recognized a gross profit in the amount of $20,000. Total sales from Subsidiary to Parent were $150,000 during 2021. 7. During 2021, Parent declared and paid dividends of $300,000, while Subsidiary declared and paid dividends of $100,000. 8. Parent accounts for its investment in Subsidiary using the cost method. 9. Assume a 40% income tax rate on all applicable items and the FIFO inventory cost flow assumption. REQUIRED: Assuming the Fair Value Enterprise Method is used, prepare the following: Elimination and adjusting entries necessary to produce consolidated financial statements for the year ended December 31, 2021. Consolidated financial statements for the year ended December 31, 2021. On December 31, 2017, Parent Company purchased 75% of the outstanding common shares of Subsidiary Company for $6.0 million in cash. On that date, the shareholders' equity of Subsidiary totaled $6 million and consisted of $1 million in no par common shares and $5 million in retained earnings. Both companies use the straight-line method to calculate depreciation and amortization. The statement of financial position for Subsidiary is provided below at December 31, 2017. December 31, 2017 Fair Values $ Assets Cash Accounts Receivable Inventory Land Buildings & Equipment (net) Total Assets 300,000 900,000 600,000 1,100,000 4,200,000 7,100,000 300,000 850,000 690,000 1,400,000 4,900,000 Liabilities Accounts Payables Long-term Notes Payables 200,000 900,000 1,100,000 200,000 1,020,000 Common Shares Retained Earnings 1,000,000 5,000,000 6,000,000 Total Liabilities & Shareholders' Equity 7,100,000 For the year ending December 31, 2021, the statements of comprehensive income for Parent and Subsidiary were as follows: Subsidiary Parent Sales & Other Revenues Cost of Goods Sold Gross Profit 12,980,000 8,000,000 4.980,000 7,045,600 4,000,000 3,045,600 Less: Operating Expenses Depreciation Expense Other Expenses Income tax expense Net Income 1,500,000 1,800,000 480,000 1,200,000 1,000,000 1,200,000 241,600 604,000 At December 31, 2021, the condensed statements of financial position for the two companies were as follows: Parent Subsidiary Assets Cash Accounts Receivable Receivable from Parent Inventory 1,600,000 2,100,000 400,000 1,100,000 300,000 700,000 2,500,000 1,500,000 5,200,000 Land Buildings & Equipment (net) Investment in Subsidiary 2,600,000 4,900,000 11,000,000 12,800,000 6,000,000 29,800,000 35,000,000 Total Assets 7,500,000 10,000,000 300,000 Liabilities Accounts Payables Payable to Subsidiary Long-term Notes Payables 5,900,000 300,000 5,100,000 11,300,000 876,000 1,176,000 Shareholders' Equity Common Shares Retained Earnings 12,100,000 11,600,000 23,700,000 1,000,000 7,824,000 8,824,000 10,000,000 Total Liabilities & Shareholders' Equity 35,000,000 ADDITIONAL INFORMATION: 1. On December 31, 2017, the Subsidiary's buildings had and an estimated remaining useful life of 20 years. 2. On December 31, 2017, Subsidiary had a trademark that had a fair value of $60,000. The trademark has an expected useful life of five years. 3. The long-term note payable was paid off December 31, 2020. 4. On October 25, 2021, Parent sold a parcel of land to Subsidiary for $800,000. The carrying value of the land at the time of the sale was $600,000. 5. During 2020, Subsidiary sold merchandise to Parent for $150,000, a price that included a gross profit of $50,000. During 2020, 40% of this merchandise was resold by Parent and the other 60% remained in its December 31, 2020, inventories. 6. On December 31, 2021, the inventories of Parent contained merchandise purchased from Subsidiary on which Subsidiary had recognized a gross profit in the amount of $20,000. Total sales from Subsidiary to Parent were $150,000 during 2021. 7. During 2021, Parent declared and paid dividends of $300,000, while Subsidiary declared and paid dividends of $100,000. 8. Parent accounts for its investment in Subsidiary using the cost method. 9. Assume a 40% income tax rate on all applicable items and the FIFO inventory cost flow assumption. REQUIRED: Assuming the Fair Value Enterprise Method is used, prepare the following: Elimination and adjusting entries necessary to produce consolidated financial statements for the year ended December 31, 2021. Consolidated financial statements for the year ended December 31, 2021