On January $1,2020,$ Parent Company acquired $80$ percent of the outstanding voting stock of Subsidiary, Inc., for a total of $\backslash (\backslash$$ $1,440,000\backslash )$ in cash and other consideration. At the acquisition date, Subsidiary had common stock of $\backslash (\backslash$$ $870,000\backslash ),$ retained earnings of $\backslash (\backslash$$ $420,000\backslash ).$ The fair value of noncontrolling interest is $\backslash (\backslash$$ $360,000\backslash ).$ Parent attributed all excess of fair value over Subsidiary's book value to various covenants $($Note: Covenants are intangible assets$)$ with a $20-$year remaining life. Parent uses the equity method to account for its investment in Subsidiary.

During the next two years, Subsidiary reported the following:

Parent sells inventory to Subsidiary using a $60$ percent markup on cost$.$ At the end of $2020$ and $2021,40$ percent of the current year purchases remain in Subsidiary's inventory.

a$.$ Compute the equity method balance in Parent's Investment in Subsidiary, Inc., account as of December $31,2021.$

b$.$ Prepare the worksheet adjustments for the December $31,2021,$ consolidation of Parent and Subsidiary.

Hint: When you calculate the intra$-$entity gains that are to be deferred, notice that in this question the markup $\backslash \%$ is based on cost$,$ not on sales.

Complete this question by entering your answers in the tabs below.

Compute the equity method balance of Investment in Subsidiary as of December $31,2021.($Please choose "Investment in Subsidiary" from the drop down list to fill the first cell$).$