On January 1, 2020, Pinnacle Corporation exchanged $3,347,500 cash for 100 percent of the outstanding voting stock of Strata Corporation. On the acquisition date, Strata had the following balance sheet: $ Cash Accounts receivable Inventory Buildings (net) Licensing agreements Total assets $ 146,000 374,000 397,000 2,045,000 3,225,000 $ 6,187,000 Accounts payable Long-term debt Common stock Retained earnings 422,000 3,085,000 1,500,000 1,180,000 Total liabilities and equity $ 6,187,000 Pinnacle prepared the following fair-value allocation: $ 3,347,500 2,680,000 $ 667,500 Fair value of Strata (consideration transferred) Carrying amount acquired Excess fair value to buildings (undervalued) to licensing agreements (overvalued) to goodwill (indefinite life) $ 352,000 (124,000) 228,000 439,500 At the acquisition date, Strata's buildings had a 10-year remaining life and its licensing agreements were due to expire in 5 years. On December 31, 2021, Strata's accounts payable included an $94,400 current liability owed to Pinnacle. Strata Corporation continues its separate legal existence as a wholly owned subsidiary of Pinnacle with independent accounting records. Pinnacle employs the initial value method in its internal accounting for its investment in Strata. The separate financial statements for the two companies for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Sales Cost of goods sold Interest expense Depreciation expense Amortization expense Dividend income Net income Retained earnings 1/1/21 Net income Dividends declared Retained Earnings 12/31/21 Cash Accounts receivable Inventory Investment in Strata Buildings (net) Licensing agreements Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/21 Total Liabilities and Owner's equity Pinnacle Strata $ (7,563,000) $ (3,351,000) 4,845,000 1,880,000 322,000 243,000 681,000 353,000 645,000 (60,000) $ (1,775,000) $ (230,000) $ (5,165,000) $ (1,462,400) (1,775, 000) (230,000) 500,000 60,000 $ (6,440,000) $ (1,632,400) $ 250,000 $ 378, 400 1,240,000 360,000 1,495,000 1,570,000 3,347,500 5,990,000 2,219,000 1,935,000 360,000 $ 12,682,500 $ 6,462,400 $ (467,500) $ (895,000) (2,775,000) (2,435,000) (3,000,000) (1,500,000) (6,440,000) (1,632,400) $(12,682,500) $ (6,462,400) a. Prepare a worksheet to consolidate the financial information for these two companies. b. Compute the following amounts that would appear on Pinnacle's 2021 separate (nonconsolidated) financial records if Pinnacle's investment accounting was based on the equity method. Subsidiary income. Retained earnings, 1/1/21. Investment in Strata. c. What effect does the parent's internal investment accounting method have on its consolidated financial statements