part B

Preparing a consolidated income statement--Equity method with noncontrolling interest, AAP and upstream and downstream intercompany invento profits Aparent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was 51,225,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $700,000 and to an unrecorded patent valued at $525,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over an 10 year period, both on the straight-line basis with no salvage value. During the current year, the parent and subsidiary reported a total of 52,100,000 of intercompany sales. At the beginning of the current year, there were $ 140,000 of upstream intercompany profits in the parent's inventory. At the en of the current year, there were $210,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $280,000 of dividends. The parent company uses the equity method of pre-consolidation Investment bookkeeping Each company reports the following income statement for the current year Parent Subsidiary Income statement: Sales 510,000,000 $3,500,000 Cost of goods sold (6.800,0002.100,000) Gross profit 3,200,000 1,400,000 Income doss) from subsidiary 145,250 Operating expenses (1.100,000) (945,000 Net income 31,545,250 3455,000 a compute the income (loss from subsidiary of $145,250 reported by the parent company in its preconsolidation income statement Do not use negative signs with your answers below. Subsidurys net income 5455000 87500 Upstream sales 140000 Adjusted subsidiary income 507500 of interest 70 355250 Downstream sales 210000 Income (oss from subsidiary 145250 b. Prepare the consolidated Income statement for the current year Do not use negative signs with your answers below Consolidated Income Statement Sales 12275000 Cost of goods sold Gross profit Operating expenses Net income . Net income attributable to noncontrolling interests: Net income attributable to the parent