. Parent purchased Subsidiary on January 1, 2014. The excess of investment cost over book value of $210,000 was allocated entirely to a 10-year royalty agreement.

Subsidiary regularly sells merchandise to Parent. In 2015, inter-company sales amounted to $123,960, with $27,558 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $40,300.

In 2016, inter-company sales amounted to $123,960 with $35,330 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $49,584.

Financial statements of Parent and Subsidiary for the year ended December 31, 2016 are presented below.

	Parent		Subsidiary
Sales revenue	$ 9,864,000		$3,718,800
Cost of goods sold	(6,904,800	)	(2,231,280	)
Gross profit	2,959,200		1,487,520
Operating expenses	(1,874,160	)	(966,888	)
Equity income	491,860		_________
Net Income	$ 1,576,900		$ 520,632
Retained Earnings, 1/1/16	$ 4,955,674		$1,921,380
Net income	1,576,900		520,632
Dividends	(301,758	)	(67,682	)
Retained Earnings, 12/31/16	$ 6,230,816		$2,374,330
Cash and receivables	$ 2,557,242		$2,064,790
Inventory	1,913,616		1,108,202
Equity investment	3,043,826
Property, plant & equipment (Net)	9,205,085		2,050,300
Total Assets	$16,719,769		$5,223,292
Accounts payable	$ 1,341,706		$ 443,876
Accrued liabilities	1,513,051		607,660
Notes payable	4,200,000		1,239,600
Common stock	1,612,764		125,280
Additional paid-in capital	1,821,432		432,546
Retained Earnings, 12/31/16	6,230,816		2,374,330
Total Liabilities and Equities	$16,719,769		$5,223,292

Required:

a.	Prepare a schedule showing the computation of Equity Income on Parent's books for 2016.
b.	Prepare a schedule showing the computation of Equity Investment on Parent's books at December 31, 2016.
c.	Prepare the consolidation worksheet with entries for 2016.