Problem 3-3 (LO 4) Sophisticated equity method adjustments, consolidated worksheet. (This is the same as Problem 3-2, except that the sophisticated equity method is used.) On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100,000, and $150,000, respectively. Net income and dividends for two years for Solar Company are as follows: 2015 2016 Net income $60,000 $90,000 Dividends 20,000 30,000 On January 1, 2015, the only undervalued tangible assets of Solar are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold in 2015. The building, which is worth $30,000 more than book value, has a remaining life of10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill. The trial balances for Paro and Solar are as follows: Paro Company Solar Company Inventory, December 31 100,000 50,000 Other Current Assets 136,000 180,000 Investment in Solar Company Note 1 Land 50,000 50,000 Buildingsand Equipment 350,000 320,000 Accumulated Depreciation (100,000) (60,000) Goodwill Other Intangibles 20,000 Current Liabilities (120,000) (40,000) Bonds Payable (100,000) Other Long-Term Liabilities (200,000) Common StockParo Company. (200,000) Other Paid-In Capital in Excess of ParParo Company (100,000) Retained EarningsParo Company (203,600) Common StockSolar Company (50,000) Other Paid-In Capital in Excess of ParSolar Company (100,000) Retained EarningsSolar Company (190,000) Net Sales (520,000) (450,000) Cost of Goods Sold 300,000 260,000 Operating Expenses 120,000 100,000 Subsidiary Income Note 1 Dividends DeclaredParo Company 50,000 Dividends DeclaredSolar Company 30,000 Note 1: To be calculated Required 1. Prepare a value analysis and a determination and distribution of excess schedule. 2. Paro Company carries the investment in Solar Company under the sophisticated equity method. In general journal form, record the entries that would be made to apply the equity method in 2015 and 2016. 3. Compute the balance that should appear in Investment in Solar Company and in Subsidiary Income on December 31, 2016 (the second year). Fill in these amounts on Paro Companys trial balance for 2016. 4. Complete a worksheet for consolidated financial statements for 2016. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and consolidated balance sheet.