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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:
Capital stock
mce_markernbsp; 8,000,000
Retained earnings
18,000,000
Accumulated other comprehensive loss
(1,000,000)
Following is revaluation information for the subsidiary's identifiable net assets at the date of acquisition:
Fair Value
Book Value
Plant assets, net
$40,000,000
$25,000,000
Straight-line, 5 yrs
Identifiable intangible assets
60,000,000
0
Straight-line, 6 yrs
It is now December 31, 2018, three years since the acquisition. The subsidiary reported the following amounts during the period 2016-2018:
2016
2017
2018
Net income
$12,000,000
$10,000,000
$15,000,000
Other comprehensive income (loss)
300,000
(160,000)
125,000
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.
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