Pate Corp. owns 80% of Strange Inc.'s common stock. During 2017, Pate sold inventory to Strange for $600,000 on the same terms as sales made to outside customers. Strange sold the entire inventory purchased from Pate by the end of 2017. Pate and Strange report the following for 2017.
________________________Pate Strange
Sales.........................$2,700,000.........$1,600,000
Cost of sales.................1,800,000..............900,000
Gross profit..................$ 900,000............$ 700,000
Required:
1. What amount should Pate report as sales revenue in its 2017 consolidated income statement?
2. What amount should Pate report as cost of sales in its 2017 consolidated income statement?