Penny Ltd. acquired a 75% interest in Szabo Inc., on December 31, 20X0, for $637,500. On that date Szabo had common stock of $550,000 and retained earnings of $125,000. Szabo’s inventory was overvalued by $85,000 on that date, and the balance of the FVA was allocated to buildings. The carrying value of Szabo’s buildings (net) on that date was $75,000. Penny’s buildings had a carrying value of $150,000 on that date. While Szabo’s buildings had a future life of 10 years, Penny’s buildings had a future life of 15 years on December 31, 20X0.

Szabo reported net income of $50,000 in 20X1 and $65,000 in 20X2. While Szabo declared $30,000 dividends in 20X1, it declared $20,000 dividends in 20X2.

Penny, which uses the equity method, reported net income of $60,000 in 20X1 and $70,000 in 20X2. Penny declared $40,000 dividends in 20X1 and $60,000 dividends in 20X2. Penny’s retained earnings under the equity method on December 31, 20X2, were $250,000.

Required

Compute the following, showing all supporting calculations:

a. non-controlling interest in net income for years 20X1 and 20X2, respectively;

b. separate-entity net income of Penny under the cost method for 20X1 and 20X2;

c. separate-entity retained earnings of Penny under the cost method on December 31, 20X1;

d. non-controlling interest at December 31, 20X2;

e. investment in Szabo at December 31, 20X2, under the equity method; and

f. the consolidated buildings (net) at December 31, 20X2, using the investment in Szabo balance calculated in part (e) above.