Upstream and Downstream Sales Peat Company owns a 90% interest in Seaton Company. The consolidated income statement drafted by the controller of Peat Company appeared as follows: LO5 Peat Company and Subsidiary Consolidated Income Statement for Year Ended December 31, 2005 Sales $14,000,000 Cost of Sales $9,200,000 Operating Expense 1,800,000 11,000,000 Combined Income 3,000,000 Less Noncontrolling Interest in Combined Income 200,000 Consolidated Net Income $ 2,800,000 During your audit you discover that intercompany sales transactions were not reflected in the of é 4 controller’s draft of the consolidated income statement. Information relating to intercompany sales and unrealized intercompany profit is as follows:
Selling Unsold at Cost Price Year-End 2004 Sales—Seaton to Peat $1,500,000 $1,800,000 z 2005 Sales—Peat to Seaton 900,000 1,400,000 2/5 Required:
Prepare a corrected consolidated income statement for Peat Company and Seaton Company for the year ended December 31, 2005.