18) Pastern Industries has an 80% ownership stake in Sascon Incorporated. At the time of purchase, the book value of Sascon's assets and liabilities were equal to the fair value. The cost of the 80% investment was equal to 80% of the book value of Sascon's net assets. At the end of 2011, they issued the following consolidated income statement:

Sales$930,000

Cost of sales(470,000)

Operating expenses(202,000)

Noncontrolling interest share(23,000)

Controlling interest share$235,000

Shortly after the statements were issued, Pastern discovered that the 2011 intercompany sales transactions had not been properly eliminated in consolidation. In fact, Pastern had sold inventory that cost $80,000 to Sascon for $90,000, and Sascon had sold inventory that cost $50,000 to Pastern for $65,000. Half of the products from both transactions still remained in inventory at December 31, 2011.

Required: Prepare a corrected income statement for Pastern and Subsidiary for 2011.

Answer rating: 100% (QA)

To prepare a corrected income statement for Pastern and its subsidiary Sascon for 2011 we need to ad... View the full answer