A subsidiary is acquired on January 1, 2016 at an acquisition cost of $100 million. The subsidiary's book value at the date of acquisition was $25 million, consisting of these accounts:
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Capital stock
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mce_markernbsp; 8,000,000
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Retained earnings
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18,000,000
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Accumulated other comprehensive loss
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(1,000,000)
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Following is revaluation information for the subsidiary's identifiable net assets at the date of acquisition:
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Fair Value
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Book Value
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|
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Plant assets, net
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$40,000,000
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$25,000,000
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Straight-line, 5 yrs
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Identifiable intangible assets
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60,000,000
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0
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Straight-line, 6 yrs
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It is now December 31, 2018, three years since the acquisition. The subsidiary reported the following amounts during the period 2016-2018:
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2016
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2017
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2018
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Net income
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$12,000,000
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$10,000,000
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$15,000,000
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Other comprehensive income (loss)
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300,000
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(160,000)
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125,000
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The subsidiary did not declare any dividends during this period. Goodwill for this acquisition is not impaired as of the end of 2018. The parent uses the complete equity method to report its investment on its own books.
Required
Calculate equity in net income, reported on the parent's books, for 2018.