Preparing a consolidated income statementEquity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $250,000 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 $150,000 and to an unrecorded patent valued at $100,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $40,000 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 Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses $6,000,000 $600,000 (4,200,000) (360,000) 1,800,000 240,000 43,225 1,140,000) (156,000) Net income $703,225 $84,000 a. Compute the Income (loss) from subsidiary of $43,225 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income $84,000 AAP (17,500) X Adjusted subsidiary income 66,500 P % of interest 65 % Income (loss) from subsidiary 43,225 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $6,600,000 4,560,000 x Cost of goods sold Gross proft Operating expenses 2,040,000 1,313,500 X 26,500 23,375 x Net income Net income attributable to noncontrolling interests Net income attributable to the parent +$ 703,225