Parent acquired Subsidiary on January 1, 2016, at a price $300,000 in excess of book value. Of that excess, $200,000 was allocated to an unrecorded patent with a 10-year life, with the remainder to goodwill. The parent uses the equity method to account for its investment in its subsidiary.

In 2017, Subsidiary sold to Parent land having a book value of $90,000 for a total price of $145,000.

Financial statements of the two companies for the year ended December 31, 2018, are presented below.

	Parent	Subsidiary
Sales Revenue	$ 2,500,000	$ 525,000
Cost of Goods Sold	(1,750,000)	(345,000)
Gross Profit	750,000	180,000
Operating Expenses	(475,000)	(102,500)
Income (loss) from Subsidiary	57,500
Net Income	$ 332,500	$ 77,500

Cost of Goods Sold	(1,750,000)	(345,000)
Gross Profit	750,000	180,000
Operating Expenses	(475,000)	(102,500)
Income (loss) from Subsidiary	57,500
Net Income	$ 332,500	$ 77,500

Retained Earnings, 1/1/18	$ 840,700	$ 245,650
Net Income	332,500	77,500
Dividends	(52,900)
Retained Earnings, 12/31/18	$ 1,120,300	$ 314,300

Cash and Receivables	$ 320,100	$ 178,200
Inventory	461,700	278,600
Equity Investment	625,400
PP&E Net	1,496,500	321,700
Total Assets	$2,903,700	$ 778,500

Accounts Payable	$ 182,400	$ 55,900
Accrued Liabilities	205,300	70,200
Notes Payable	810,000	212,000
Common Stock	354,200	45,000
Additional Paid-in Capital	231,500	81,100
Retained Earnings, 12/31/18	1,120,300	314,300
Total Liabilities and Equities	$ 2,903,700	$ 778,500

Required:

a. Prepare a schedule showing the computation of Income (loss) from subsidiary on the Parent's pre-consolidation books for 2018.

b. Prepare a schedule showing the computation of Equity Investment on the Parent's pre-consolidation books at December 31, 2018.

c. Prepare the consolidation entries for 2018.