Pap Corporation purchased an 80 percent interest in Sak Corporation for $2,400,000 on January 1, 2012, at which time Sak's stockholders' equity consisted of $2,000,000 common stock and $800,000 retained earnings. The excess fair value over book value was goodwill. Comparative income statements for the two corporations for 2013 are as follows:

Pap Sak

Sales ................................... $4,000 ........... $2,000

Income from Sak ........................ 448 ............... -

Cost of sales ......................... (1,600) ........... (1,000)

Depreciation expense ................. (520) ............. (160)

Other expenses ........................ (360) ............. (240)

Net income ........................... $1,968 ............. $ 600

Dividends of Pap and Sak for all of 2013 were $1,200,000 and $400,000, respectively. During 2012 Sak sold inventory items to Pap for $320,000. This merchandise cost Sak $200,000, and one-third of it remained in Pap's December 31, 2012, inventory. During 2013 Sak's sales to Pap were $360,000. This merchandise cost Sak $240,000, and one-half of it remained in Pap's December 31, 2013, inventory.

REQUIRED

Prepare a consolidated income statement for Pap Corporation and Subsidiary for the year ended December 31, 2013.