Preparing a consolidated income statement-Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $1,050,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $600,000 and to an unrecorded patent valued at $450,000. The building asset is being depreciated over a 15-year period and the patent is being amortized over an 10 year period, both on the straight line basks with no salvage value. During the current year, the parent and subsidiary reported a total of $1,800,000 of intercompany sales. At the beginning of the current year, there were $120,000 of upstream intercompany profits in the parent's Inventory. At the end of the current year, there were $180,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $240,000 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 Susidary Income statement: $10,000 000 3 000 000 Cost of goods sold 16,800,000 1,300.000 Gross profit 3.200 000 1.200.000 Incomes from subsidiary 117,500 Operating experien (1,800,000 $10.000 Nincome $1,517.500 $300.000 a. Compute the income (loss) from subsidiary of $117.500 reported by the parent company in its preconsolidation Income statement Do not use negative signs with your answers below. Subsidiary's net income 5 AAT Upstream sales Adjusted subsidiary income s Pof interest Downstream sales Income from subsidiary $ 117,500 b. Prepare the consolidated Income statement for the current year. Do not use negative signs with your answers below. Comolidated Income Statement 3 Cost of goods sold Gross profit Operating Preparing a consolidated income statement-Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $1,050,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $600,000 and to an unrecorded patent valued at $450,000. The building asset is being depreciated over a 15-year period and the patent is being amortized over an 10 year period, both on the straight line basks with no salvage value. During the current year, the parent and subsidiary reported a total of $1,800,000 of intercompany sales. At the beginning of the current year, there were $120,000 of upstream intercompany profits in the parent's Inventory. At the end of the current year, there were $180,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $240,000 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 Susidary Income statement: $10,000 000 3 000 000 Cost of goods sold 16,800,000 1,300.000 Gross profit 3.200 000 1.200.000 Incomes from subsidiary 117,500 Operating experien (1,800,000 $10.000 Nincome $1,517.500 $300.000 a. Compute the income (loss) from subsidiary of $117.500 reported by the parent company in its preconsolidation Income statement Do not use negative signs with your answers below. Subsidiary's net income 5 AAT Upstream sales Adjusted subsidiary income s Pof interest Downstream sales Income from subsidiary $ 117,500 b. Prepare the consolidated Income statement for the current year. Do not use negative signs with your answers below. Comolidated Income Statement 3 Cost of goods sold Gross profit Operating