On January 1 2020. Pinnacle Corporation exchanged $3,548.000 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 Huildinga nat) Licensing agreements Total watu $ 161,000 290,00 415,000 2,150,000 3,205,000 56,221.00 Accounts payable 5 436.DDD Long-term debt 2.925,00 Common stock 1,500, DD Retained earnings 1,360,000 Total liabilities and equity 54,221,00 Pinnacle prepared the following fair value allocation $ 3,548, DDD 2,860, DD 5 630, DDS Fair value of Strata consideration transferred) Carrying amount acquired Exces tais value to buildinga (undervalued) to licensing agents overvalued) to goodwill findetinite lis) $ 320,000 (105, DDS 215,000 473,000 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 $97,200 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. Pinnacle Strata 6 (3,378, DD3) ; (1,428, DD7 ) Cost of goods sold 4,375,000 2,090,00 Interestepe 260,00 255, Depreciation expanas 606, 366,00 Amortization expande Dividend in 145,00) Het is.com 5 (1,680,DDO) 5 1274,000) Rutaimed arise 1/1/21 5 (3,220, DD) 5 (1,709, DDD) Net Sac (1,680, DDO) [274,00) Dividenda declared 500, DO 45,DDO Ratsised Earnisga 12/31/21 5 (4,400, DDO) 5 (1,938, DDD) 5 387.DDD 406,500 Account receivable 1,270, DD 225, DD Inventory 1,525,000 1,560,000 Investment in strata 3,540,000 Buildinganet) 3,760.00 2,386, DD Licensing agent 1,923, Goodwill 590,00 Total a $ 13,080, DDD 6,500,00 Accounts payable 5 (495, DDO) [337,50) Long-term debt (3,185, DDO) (2,125, DD) Como utoek (3,000, DDO) (1,500,00) Retained earnings 12/31/21 (4,400, DDD) (1,938,DD) Total Liabilities and Over'a 5(13,000,00) 5 (4,500,500) equity a. Prepare a worksheet to consolidate the financial Information for these two companies. b. Compute the following amounts that would appear on Pinnade's 2021 separate (nonconsolidated) financial records if Pinnacle's Investment accounting was based on the equity method. Subsidiary income Retained earnings, WV21 Investment in Strata Accounts Consolidated Tetals Sales Cost of goods sold Interest asperise Depreciation expense Amortization expense Dividend income Net income PINNACLE COMPANY AND SUBSIDIARY STRATA Consolidation Worksheet For Year December 31, 2021 Consolidation Entries Pinnacle Strata Debit Credit 5 (7.375,000 $13.625,000) 4,875,000 2,090,000 280,000 255,000 605,000 365,000 641,000 145,000 $ (1.680,000 $274,000 Rutained eaminga 1/1/21 Nat income Dividends declared Retained earnings 12/31/21 (5.220,0001 (1,700,0001 (1,680,000) (274,0001 500,000 45,000 $ 1.400,000 $ (1.938,000) Cash Accounts receivable Inventory Investment in State Buildings inet) Licensing agreements Goodwill $ 387,000 $ 408,500 1.270,000 225,000 1.525,000 1.580,000 3,548,000 5,780,000 2.385,000 1.923,000 590,000 $ 13,000,000 $ 6.500,500 Accounts payable (495,000 (937,5001 Long-term deb (3.185,000 2.125,000 Common stock - Pinnacle (3.000,000) Common stock - Strata (1.500,000 Rutained caminga 12/91/21 18.400,0001 (1.938,000) Total Liabidea and Owners Equity $(13.080,000 $16.500,6003 0 Required A Required B > Amounts Subsidiary income 2 Retained caminga 1/1/21 3 Investment in Syata Required A Required Required What effect does the parent's internal investment accounting method have on its consolidated financial statements? Erfect of parent's internal investment accounting method Amounts Subsidiary income 2 Retained caminga 1/1/21 3 Investment in Syata Required A Required Required What effect does the parent's internal investment accounting method have on its consolidated financial statements? Erfect of parent's internal investment accounting method