a$.$ For the year ended December $31,2016,$ explain how the parent$$s pre$-$consolidation investment income of $$40,800$ was determined.

Under the cost method, investment income equals the dividends received from the subsidiary.

Under the cost method, investment income equals equity income minus dividends received from the subsidiary.

Under the cost method, investment income equals equity income$$plus dividends received from the subsidiary.

b$.$ Explain how the parent$$s December $31,2016$ pre$-$consolidation Equity Investment balance of $$2,112,000$ was determined.

Under the cost method, it is the original purchase price plus dividends received by the subsidiary since acquisition.

Under the cost method, it is the original purchase price for the subsidiary.

Under the cost method, it is the original purchase price plus equity income and minus dividends received by the subsidiary since acquisition.

c$.$ For the year ended December $31,2016,$ reconcile the parent company$$s pre$-$consolidation net income of $$1,220,520$ to the consolidated balance of $$1,405,920.$

Do not use negative signs with your answers.

Parent Income $($cost method$)$Answer $3$

Deduct: p$\%$ of subsidiary dividendsAnswer $4$

Answer $5$p$\%$ of subsidiary net incomep$\%$ of AAP amortization for yearAnswer $6$

Answer $7$p$\%$ of subsidiary net incomep$\%$ of AAP amortization for yearAnswer $8$

Parent Income $($equity method$)$Answer $9$

d$.$ What was the subsidiary$$s retained earnings balance on the acquisition date? You should assume the Common Stock and APIC have not changed since the acquisition date.$($Hint: You will need to use an account that does not change after the acquisition date.$)$

$Answer $10$

e$.$ Why aren$$t the Stockholders$$ Equity accounts of the subsidiary reflected in the consolidated balance sheet?

The subsidiary$$s stockholders$$ equity is not held by a party outside of the economic entity represented in the consolidated financial statements and, as a result, should not be included in the consolidated stockholders$$ equity.

The subsidiary$$s stockholders$$ equity is held by a party outside of the economic entity represented in the consolidated financial statements and, as a result, should not be included in the consolidated stockholders$$ equity.

The subsidiary$$s stockholders$$ equity is held by a party outside of the economic entity represented in the consolidated financial statements and, as a result, is reflected in the Equity Investment account on the consolidated balance sheet rather than be included in the consolidated stockholders$$ equity.

f$.$ Provide the consolidation entries for the year ending December $31,2016.$