Question 4 Not yet answered Marked out of 1.00 Flag question Pre-consolidation bookkeeping, upstream intercompany sales, profits in ending inventory-Equity method Assume that a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent's and subsidiary's "stand alone" pre-consolidation income statements for the year ending December 31, 2013, prior to any investment bookkeeping or intercompany adjustments: Parent Subsidiary Revenues $7,000,000 $4,750,000 Cost of goods sold (4,550,000) (2,850,000) Gross profit 2,450,000 1,900,000 Selling general & administrative expenses (1,625,000) (1,262,500) Net income $825,000 $637,500 On January 1, 2013, the neither company held any inventories purchased from the other affiliate. All of the sales made by either company have the same gross margin regardless of whether they are made to affiliates or non-affiliates. Assume that during the year ended December 31, 2013, the subsidiary sold to the parent $250,000 of merchandise. At December 31, 2013, the parent still held in its inventory 25% of the goods purchased from the subsidiary during 2013. What is the amount of "income from subsidiary" recognized by the parent company if it applies the equity method of pre-consolidation investment accounting? O$537,500 O$575,000 O$612,500 O$233,125