Primo Company acquired a 60 percent interest in Sorrento Company on January 1st for $5,000,000 cash. Assume the cost is equal to fair value. Also, the difference between the cost of the investment and book value is $1,250,000. Primo assigned the $1,250,000 fair value over book value of the interest acquired to the following assets Excess of Fair Value over Book Value Assigned to: Inventories Building Goodwill Total FV over BV $250,000 Sold in current year $500,000 4 year remaining life $500,000 $1,250,000 During the year Sorrento reported net income and dividends as follows: Net Income $2,000,000 Dividends $500,000 REQUIRED a. Determine Primo's income from Sorrento. b. Determine the December 31 balance of the Investment in Sorrento account. Note: The following template is included as a guide to assist you in formulating your answer a) Determine Income from Sub: Sorrento's Net Income less Amortization: Inventories Building Sub's Net Income Parent's Share of Sub's Net Income is 60% of the above total b) Calculation of Investment balance at December 31st: Investment Balance at January 1st Add: Share of Sub's net income Less: share of Dividends = Balance at December 31st