Pate Corp. owns 80% of Strange Inc’s common stock. During 2008, 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 2008. Pate and Strange report the following for 2008.

Required:
1. What amount should Pate report as sales revenue in its 2008 consolidated income statement?
2. What amount should Pate report as cost of sales in its 2008 consolidated income statement?

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Sales Cost of sales Pate Strange $2,700,000 1,800,000 Gross profit $ 900,000 $1,600,000 900,000 $ 700,000