Question 16.16.

A subsidiary is acquired on January 1, 2016 at an acquisition cost of $100 million. The subsidiarys book value at the date of acquisition was $25 million, consisting of these accounts:

Capital stock	$ 8,000,000
Retained earnings	18,000,000
Accumulated other comprehensive loss	(1,000,000)

Following is revaluation information for the subsidiarys identifiable net assets at the date of acquisition:

	Fair Value	Book Value
Plant assets, net	$40,000,000	$25,000,000	Straight-line, 5 yrs
Identifiable intangible assets	60,000,000	0	Straight-line, 6 yrs

It is now December 31, 2018, three years since the acquisition. The subsidiary reported the following amounts during the period 2016-2018:

	2016	2017	2018
Net income	$12,000,000	$10,000,000	$15,000,000
Other comprehensive income (loss)	300,000	(160,000)	125,000

The subsidiary did not declare any dividends during this period. Goodwill for this acquisition is not impaired as of the end of 2018. The parent uses the complete equity method to report its investment on its own books.

Required

Calculate equity in net income, reported on the parents books, for 2018.

Show your work, i.e. what numbers were added, subtracted, multiplied or divided to arrive at your solution. Partial credit is given for responses to this question IF supporting calculations are provided. NO points are given if work is not provided. (Points : 8)