Preparing a consolidated income statement-Equity method with noncontrolling interest, AAP and upstream and downstream intercompany Inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $1,225,000 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 $2,100,000 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 end 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 5280,000 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: Cost of foods sold Gross pront Income to bom subsidiary Operating expenses Not income 510,000,000 $2.500.000 16.100.000) (2.100.000) 3,200,000 1,400,000 145.250 (1 800.000 (945.000) $1,545,250 5455.000 $ 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. Subsidiary's net income Upstream Sales Adjusted subsidiary income 3 Pof interest X Downstream sales Income foss) from subsidiary 3 b. Prepare the consolidated income statement for the current year Do not use negative signs with your answers below Consolidated Income Statement Sales Cost of goods sold Gross profit Operating expenses 000