Prepare consolidation spreadsheet for intercompany sale of equipment-Cost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $892,000. The purchase price was $359,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $33,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, $124,000 for an unrecorded patent with an 8-year remaining life and $137,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method. On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $134,700. The parent had acquired the equipment at a cost of $130,800 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10- year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement Sales $1,300,000 Cost of goods sold Balance sheet $598,000 Assets (715,000) (364,000) Cash $117,000 $78,000 Gross profit 585,000 234,000 Accounts receivable 156,000 117,000 Deprec. & amort. Expense (39,000) (26,000) Inventory Operating expenses (390,000) (104,000) Equity investment 364,000 182,000 892,000 Interest expense (19,500) Total expenses (448,500) (6,500) Property, plant & equipment (136,500) Other assets 442,000 312,000 169,000 Income (loss) from subsidiary 45,500 Total assets 2,140,000 286,000 $975,000 Net income $182,000 $97,500 Liabilities and stockholders' equity Accounts payable $325,000 $70,200 Statement of retained earnings Accrued liabilities BOY retained earnings $715,000 $325,000 Notes payable 32,500 195,000 59,800 78,000 Net income 182,000 Dividends (149,500) 97,500 Common stock (45,500) Retained earnings 840,000 390,000 747,500 377,000 Ending retained earnings $747,500 $377,000 Total liabilities and equity 2,140,000 $975,000