Pastern Industries Has an 80% Ownership Stake in Sascon Incorporated

Essay

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:
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.