On January 1, 2021, Pinnacle Company buys 100 % of the voting stock of Sterling Inc. for $150 million in cash. After the acquisition, the trial balance of each company (in millions) at January 1, 2021, along with the fair value of Sterling assets and liabilities and their remaining useful lives, is: Trial Balance Sterling Fair Useful Lives Pinnacle Sterling Value Current assets 46 9 9 Investment in Sterling 150 Property and equipment, net 25 26 38 6 years Intangible assets 14 21 16 5 years Current liabilities (29) (7) (7) Long-term debt (38) (8) (8) Equity (168) (41) Total Goodwill resulting from the acquisition was $102 million. During 2021 Sterling has net income of $10 million and pays dividends of $1 million. The pre-closing trial balance of each company (in millions) at December 31, 2021 is: 2021 Pinnacle Sterling Current assets $ 52 $ 14 Investment in Sterling 158 Property and equipment, net 33 28 Intangible assets 12 19 Current liabilities (31) (6) Long-term debt Equity Dividends Sales revenue (35) (5) (168) (41) (151) (127) Cost of goods sold 96 45 Operating expenses 43 72 Equity in net income (9) Total $ $ Requirements: 1. Calculate equity in net income for Pinnacle for 2021. 2. Prepare the equity method entries for the Pinnacle books for 2021. 3. Prepare the 12/31/21 eliminating entries (C, E, R and O). MGT 136 HOW Chapter 4 - Requirement 1 Equity in Net Income - 2021 (millions) Sterling net income Property and equipment write-off Intangible assets write-off Equity in net income $ Input Formula MGT 136 HOW Chapter 4 - Requirement 2 Equity Method Entries - 2021 (millions) Input Formula To record equity in net income: Investment in Sterling Equity in net income of Sterling To record dividends paid to Pinnacle: Cash Investment in Sterling H DR CR Eliminating Entries - 2021 (millions) C entry: Equity in net income of Sterling Investment in Sterling Equity (Dividends) E entry: Equity Investment in Sterling R entry: Goodwill Property and equipment, net Intangible assets Investment in Sterlling O entry: Depreciation expense Intangible assets Property and equipment, net Amortization expense DR CR