On December 31, 2010, Peat Limited purchased 70% of the outstanding common shares of Soap Limited for $7 million. On that date, Soap€™s shareholders€™ equity consisted of common shares of $5 million and retained earnings of $1.6 million.

The financial statements for Peat and Soap for the year ended December 31, 2013, are as follows:

Additional information:
1. In negotiating the purchase price, it was agreed that the fair value of all of Soap€™s assets and liabilities was equal to their carrying values except for the following:

2. Both companies use firstin, firstout (FIFO) to account for their inventory and the straight-line method for depreciating their equipment. Soap€™s equipment at the date of acquisition had a remaining useful life of five years.
3. Each year, goodwill is evaluated to determine if there has been impairment. Goodwill impairment was $100,000 in 2011 and zero for 2012 and 2013.
4. On January 2, 2011, Peat sold equipment to Soap for $552,000. Peat had paid $600,000 for this equipment on January 2, 2009, and had been depreciating the equipment on a straight-line basis over 10 years. There was no change in the estimated useful life of this equipment at the time of the purchase by Soap.
5. During 2013, Peat purchased merchandise from Soap for $600,000. Of this merchandise, 60% was resold by Peat and the other 40% remains in its December 31, 2013, inventory. On December 31, 2012, the inventories of Peat contained $400,000 of merchandise purchased from Soap. Soap earns a gross margin of 25% on its sales to Peat.
6. Ignore income taxes.
Required
(a) Calculate the following amounts for the consolidated income statement for the year ended
December 31, 2013:
1. Sales
2. Cost of sales
3. Consolidated net income attributable to Peat€™s shareholders

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PEAT AND SOAP Balance Sheet December 31, 2013 in $000s) Peat Soap $ 140 $680 1,600 2,800 4,680 7,000 16,760 $ 400 5,800 2,000 8,560 $16,760 Cash Accounts receivable Inventory Equipment-net Investment in Soap 900 1,160 10,800 Current liabilities Notes payable Common shares Retained earnings $13,000 1,020 4,740 5,000 2,240 13,000 PEAT AND SOAP Statement of Income and Retained Earnings Year ended December 31, 2013 (in $000s) Peat Soap Sales Cost of sales Gross profit Other revenue Other expenses Net income Retained earnings, beginning Dividends paid Retained earnings, end $6,300 3,620 2,680 $10,840 6,560 4,280 500 (1,720) 1,460 7,200 (100) $8,560 (3,480) 800 2,040 (600) 2,240 Asset Inventory Equipment Carrying value $ 940,000 2,200,000 Fair value $1,000,000 2,600,000