Pate Corp. owns 80% of Strange Inc.’s common stock. During 20X1, 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 20X1. Pate and Strange report the following for 20X1:

Required:

1. What amount should Pate report as sales revenue in its 20X1 consolidated income statement?

2. What amount should Pate report as cost of sales in its 20X1 consolidated income statement?

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