Prepare consolidation entries for the upstream sale of the equipment.

The parent company acquired 75% of the subsidiary on January 1, 2011. On the acquisition date, the fair value of the subsidiary assets exceeded book value by $350,000. All of that excess was allocated to a Royalty Agreement (there is no Goodwill). The Royalty Agreement has a 7-year remaining useful life on the acquisition date, with no salvage value and straight line amortization. In January, 2014 the subsidiary sold equipment to the parent for a cash price of $250,000. The subsidiary acquired the equipment at a cost of $480,000. Using a 10 year life, with no salvage value, the equipment had been depreciated for 6 full years prior to the date of sale. The parent will depreciate the equipment purchased over the remaining 4 years. The financial statements provided are for the year ended December 31, 2016.

	Parent	Subsidiary
Income Statement
Sales	3,400,000	900,000
Cost of Goods Sold	(2,400,000)	(500,000)
Gross Profit	1,000,000	400,000
Income (loss) from subsidiary	85,875
Operating Expenses	(522,000)	(250,000)
Net Income	563,875	150,000
Consolidated NI attrib to NCI
Consolidated NI attrib to CI
Statement of Ret Earnings:
Beg. Ret. Earn.	1,799,750	200,000
Consolidated NI attrib to CI	563,875	150,000
Dividends Declared	(100,000)	(30,000)
Ending Retained Earnings	2,263,625	320,000
Balance Sheet
Cash	619,500	250,000
Accounts receivable	530,000	420,000
Inventories	900,000	550,000
Equity investment	454,125
PPE, net	3,500,000	1,000,000
Royalty agreement
Total Assets	6,003,625	2,220,000
Accounts Payable	340,000	250,000
Other current liabilities	400,000	300,000
Long-term liabilities	1,500,000	1,100,000
Common Stock	200,000	100,000
APIC	1,300,000	150,000
Retained Earnings	2,263,625	320,000
Noncontrolling Interest
Total Liabilities and Equity	6,003,625	2,220,000