11 E eBook Print The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared: The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $14,400. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. Both gains were taxed at a rate of 40%. CONSOLIDATED INCOME STATEMENTS Year 5 eferences Miscellaneous revenues $760,000 Year 6 $ 835,000 Gain on sale of assets 9,600 43,400 Rental revenue 3,600 14,400 773,200 892,800 Miscellaneous expenses 401,400 492,740 Rental expense 54,100 66,900 Depreciation expense 77,000 82,100 Income tax expense 82,000 95,500 Non-controlling interest Net income $ 125,200 5,400 740,640 5 152,160 33,500 648,000