On January 1, 2020, Pinnacle Corporation exchanged $3,407,000 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 $ 114,000 298,000 Accounts payable Long-term debt 396,000 3,395,000 419,000 Common stock 1,500,000 2,105,000 Retained earnings 1,125,000 3,480,000 $ 6,416,000 Total liabilities and equity $ 6,416,000 Pinnacle prepared the following fair-value allocation: Fair value of Strata (consideration transferred) Carrying amount acquired Excess fair value to buildings (undervalued) to licensing agreements (overvalued) to goodwill (indefinite life) $ 3,407,000 2,625,000 $ 782,000 470,000 (115,000) 355,000 427,000 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 $89,200 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 Pinnacle Strata $ (7,455,000) $ (3,526,000) 4,670,000 342,000 1,940,000 Depreciation expense 648,000 238,000 436,000 Amortization expense 696,000 Dividend income (40,000) Net income $ (1,835,000) $ (216,000) Retained earnings 1/1/21 $ (5,320,000) $ (1,463,000) Net income (1,835,000) (216,000) Dividends declared 450,000 40,000 Retained Earnings 12/31/21 $ (6,705,000) $ (1,639,000) Cash $ 240,500 $ 522,000 Accounts receivable 1,640,000 405,000 Inventory 1,175,000 1,125,000 Investment in Strata 3,407,000 Buildings (net) 6,010,000 2,216,000 Licensing agreements 2,088,000 Goodwill 520,000 Total assets $ 12,992,500 $ 6,356,000 Accounts payable $ (307,500) $ (752,000) Long-term debt (2,980,000) (2,465,000) Common stock (3,000,000) (1,500,000) Retained earnings 12/31/21 (6,705,000) (1,639,000) Total Liabilities and Owner's equity $ (12,992,500) $ (6,356,000) 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.