Penguin purchased 70% of Star on January 1, 2016 for $2,200,000. The FV of the noncontrolling interests was 850,000. The book value of Stars equity was $2,300,000 at the time. Penguin uses the equity method to account for its investment in Star.

The excess of investment cost over book value was allocated as follows: Equipment (20-year life) $130,000 Customer list (10-year life) 184,000 Patent (10-year life) 147,000 Goodwill 289,000 Total $750,000 Star regularly sells merchandise to Penguin. In 2018, inter-company sales amounted to $50,100, with $16,300 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $18,900. In 2019, inter-company sales amounted to $87,400 with $23,800 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $37,500. On January 2, 2019, Penguin sold equipment to Star for $60,000. The equipment had a cost of $80,000 and accumulated depreciation of $45,000. The remaining life of the equipment was estimated at 4 years. Financial statements of Penguin and Star for the year ended December 31, 2019 are presented below.

Penguin Star Sales revenue $ 5,706,000 $1,833,500 Cost of goods sold (4,003,800) (1,110,650) Gross profit 1,702,200 722,850 Operating expenses (931,020) (336,800) Income (loss) from subsidiary 218,515 _________ Net Income $ 989,695 $ 386,050 Retained Earnings, 1/1/19 $ 3,225,665 $ 980,010 Net income 989,695 386,050 Dividends (154,690) (42,520) Retained Earnings, 12/31/19 $ 4,060,670 $1,323,540 Cash and receivables $ 1,962,802 $1,067,340 Inventory 1,158,650 690,270 Equity investment 1,660,268 Property, plant & equipment (Net) 5,358,920 1,327,490 Total Assets $10,140,640 $3,085,100 Accounts payable $ 708,300 $ 311,210 Accrued liabilities 803,130 370,650 Notes payable 2,940,000 665,300 Common stock 860,940 183,950 Additional paid-in capital 767,600 230,450 Retained Earnings, 12/31/19 4,060,670 1,323,540 Total Liabilities and Equities $10,140,640 $3,085,100

a. How was the income from subsidiary calculated by Penguin Company? What is the income attributable to NCI and how was it calculated? b. Do a proof of the investment account and NCI account at 12/31/18 and 12/31/19. I am looking for you to tell me what comprises the balance in these accounts (BV Sub Equity + .). Note: You have all the information you would need to calculate both beginning and ending investment balances! Do not do a rollforward where you start with 12/31/18 and then put in current year activity to get the 12/31/19 balance. That is not what I mean by proof. Use this method to check your answer:) c. Prepare the entries required under the equity method on Penguin's pre-consolidation books for 2019. d. Prepare the consolidation entries for 2019. Every CEADI entry is required to do this consolidation. e. Prepare the consolidation spreadsheet.