Ponon Corporation acquired all of the stock of Santo Corporation on January 2, 2014, for $25,000,000 cash and debt. The book value of Santo's stockholders' equity was $10,000,000 and the resulting $15,000,000 excess of acquisition cost over book value was allocated as follows:

(1) Santo uses the FIFO method of inventory valuation. Its inventory purchases in 2014 were $6,200,000.
(2) Goodwill is impaired by $400,000 during 2014.
Below are the condensed financial statements of Ponon and Santo at December 31,2014. Neither company declared dividends in 2014. Ponon uses the complete equity method to report its investment in Santo on its own books.

Required
a. Prepare a schedule to compute the 2014 equity method income accrual.
b. Use a working paper to consolidate the trial balances of Ponon and Santo at December 31,2014.
c. Prepare the consolidated balance sheet and statement of income and retained earnings at December 31,2014.

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Account Dr (Cr) Amortization Period Inventory. Patents (previously unrecorded).. Long-term debt Goodwill 8,000,000 .. 1,500,000 (1,000,000) 4,500,000 8 years 4 years 10 years (1) Santo uses the FIFO method of inventory valuation. Its inventory purchases in 2014 were $6,200,000. (2) Goodwill is impaired by $400,000 during 2014 Condensed Balance Sheets December 31, 2014 Ponon Santo Assets 4,500,000 5,000,000 8,000,000 26,325,000 $43,825,000 3,100,000 5,200,000 12,000,000 Plant assets, net. .. Total assets... Liabilities and Stockholders' Equity Long-tern debt.. .. _ . Retained earnings... $20,300,000 5,100,000 20,000,000 8,000,000 10,725,000 $ 2,000,000 3,300,000 6,000,000 9,000,000 $20,300,000 $43,825,000 Condensed Income Statements For Year Ended December 31, 2014 Ponon Santo $13,200,000 1,325,000 31,325,000 18,000,000 2,000,000 5,400,000 25,400,000 Total revenues . 13,200,000 4,000,000 3,200,000 1,000,000 8,200,000 5,000,000 Depreciation and amortization expense.... Interest and other expenses... 5,925,000