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 2014, 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 2014 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, 2014.

Required: Prepare a corrected income statement for Pastern and Subsidiary for 2014.
What will be an ideal response?

Pastern Corporation and Subsidiary
Consolidated Income Statement
for the year ended December 31, 2014

Sales (combined $930,000 - 90,000 - 65,000) $775,000
Cost of Goods Sold (see below) (327,500)
Expenses (202,000)
Noncontrolling interest share (see below) (21,500)
Controlling interest share $224,000

Consolidated cost of goods sold computation:
Combined cost of sales $470,000
Less: Intercompany sales (90,000 + 65,000) (155,000)
Add: Unrealized profit in ending inventory
($10,000 + 15,000) 1/2 12,500
Consolidated Cost of Goods Sold $327,500

Noncontrolling interest calculation:
Calculated original Sascon Income
($23,000 / 20%) $115,000
Less: Unrealized profit in ending inventory
from upstream sale ($15,000 × 1/2) (7,500)
Sascon adjusted separate net income 107,500
Noncontrolling interest share (20%) 21,500