Preparing a consolidated income statementEquity method with noncontrolling interest and AAP

A parent company purchased a 60% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $625,000 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 $375,000 and to an unrecorded patent valued at $250,000. 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 $100,000 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 Net income $6,000,000 $1,500,000 (4,200,000) (900,000) 1,800,000 600,000 99,750 (1,140,000) (390,000) $759,750 $210,000 a. Compute the Income (loss) from subsidiary of $99,750 reported by the parent company in its preconsolidation income statement. 0 Do not use negative signs with your answers below. Subsidiary's net income $ 0 AAP Adjusted subsidiary income P % of interest 0 % Income (loss) from subsidiary $ $ 0 X 0 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. $ 0 Consolidated Income Statement Sales Cost of goods sold Gross profit Operating expenses 0 0 0 0 0 0