Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased an 80% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $360,000 in excess of the subsidiarys Stockholders Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $216,000 and to an unrecorded patent valued at $144,000. The building asset is being depreciated over a 16-year period and the patent is being amortized over an 8-year period, both on the straight-line basis with no salvage value. During the current year, the parent and subsidiary reported a total of $540,000 of intercompany sales. At the beginning of the current year, there were $37,800 of upstream intercompany profits in the parents inventory. At the end of the current year, there were $58,500 of downstream intercompany profits in the subsidiarys inventory. During the current year, the subsidiary declared and paid $81,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales $8,280,000 $1,170,000 Cost of goods sold (5,400,000) (540,000) Gross profit 2,880,000 630,000 Income (loss) from subsidiary 133,740 - Operating expenses (2,160,000) (396,000) Net income $853,740 $234,000 a. Compute the Income (loss) from subsidiary of $133,740 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income Answer AAP Answer Upstream sales Answer Adjusted subsidiary income Answer P % of interest X Answer % Answer Downstream sales Answer Income (loss) from subsidiary Answer b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales Answer Cost of goods sold Answer Gross profit Answer Operating expenses Answer Answer Answer