ASST 1001 Chapter : Chapter 5
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TernCorporation acquired an 80% interest in Harbor Corporation severalyears ago when Harborâs book values and fair values were equal.Separate company income statements for Tern and Harbor for the yearended December 31, 2005 are summarized as follows: | |||||||||||||||
Tern | Harbor | ||||||||||||||
Sales Revenue | $ | 1,000,000 | $ | 600,000 | |||||||||||
Income from Harbor | 80,000 | ||||||||||||||
Cost of Goods Sold | ( | 600,000 | )( | 300,000 | ) | ||||||||||
Expenses | ( | 200,000 | )( | 200,000 | ) | ||||||||||
Net Income | $ | 280,000 | $ | 100,000 | |||||||||||
During 2004 Tern sold merchandise that cost $120,000 to Harbor for$180,000. Half of this merchandise remained in Harborâs inventoryat December 31, 2004. During 2005, Tern sold merchandise that cost$150,000 to Harbor for $225,000. One-third of this merchandiseremained in Harborâs December 31, 2005 inventory. | |||||||||||||||
Required: | |||||||||||||||
Prepare a consolidated incomestatement for Tern Corporation and Subsidiary for 2005. |