On January 1, 20X1, Parent Company Purchased 80% of the Common

On January 1, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $300,000. Any excess of cost over book value on this date is attributed to a patent, to be amortized over 10 years.
On this date, Subsidiary had total shareholders' equity as follows:
$\begin{array}{lr}8 \% \text { Preferred Stock, } \$ 100 \text { par } & \$ 100,000 \\\text { Common Stock, } \$ 10 \text { par } & 50,000 \\\text { Other Paid-in Capital } & 120,000 \\\text { Retained Earnings } & \$ 180,000 \\\quad \text { Total } & \$ 450,000\end{array}$ The 8% preferred stock is cumulative, non-participating, and has a liquidating value of par plus dividends in arrears. There were no preferred dividends in arrears on January 1, 20X1.
During 20X1, Subsidiary had a net loss of $10,000 and paid no dividends. In 20X2, Subsidiary had net income of $100,000 and paid dividends, on preferred and common, totaling $40,000.
On January 1, 20X2, Parent purchased $50,000 par value of Subsidiary's preferred stock for $52,000. At year end, the preferred is still held as an investment.
In 20X1 and 20X2, Parent has accounted for its investments in Subsidiary's preferred and common using the simple equity method.
During 20X2, Subsidiary sold merchandise to Parent for $40,000, of which $15,000 is still held by Parent on December 31, 20X2. Subsidiary's usual gross profit is 40%.
Required:
Complete the Figure 7-10 worksheet for consolidated financial statements for the year ended December 31, 20X2.