5 -10 The income statements of Evans Company and Falcon Company for the current year are shown below :" Evans Falcon Sales revenues $450 , 000 $ 500 , 000 Dividend revenues 32, 000 Rental revenues 3.3 , 500 Interest revenues 18, 000 515 , 600 618 , 000 Raw materials and Finished goods purchased 268 , 000 328, 000 Changes in inventory* 20, 000 25, 000 Other expenses 104, 000 145 , 000 Interest expense 30, 000 Income taxes 31 , 700 43, 500 453, 700 5.42, 500 Profit $ 61 , 900 $ 75 , 500 The following amounts were taken from the statement of changes in equity for the two companies : Evans Falcon Retained earnings , beginning of year 532, 000 348, 000 Dividends declared 30 , 000 40, 000 Evans owns 80% of the outstanding common shares of Falcon , purchased at the time the latter* company was organized . Evans sells parts to Falcon at a price that is 25% above cost . Total sales from Evans to Falcon during the year were $ 90 , 000 . Included in Falcon's inventories were parts purchased from Evans amounting to $ 21, 250 in beginning inventory and $ 28 , 750 in the ending inventory .* Falcon sells back to Evans certain finished goods , at a price that gives Falcon an average gross profit of 30% on these intercompany sales . Total sales from Falcon to Evans during the year were $ 177 , 000 Included in the inventories of Evans were finished goods acquired from Falcon amounting to $ 1 1 , 000 in beginning inventory and $3 , 000 in ending inventory . Falcon rents an office building from Evans and pays $ 2 , 800 per month in rent . Evans has borrowed $500 , 000 through a series of 5%' notes , of which Falcon holds $350 , 000 as notes receivable . Use* income tax allocation at a 40% rate