B- Penguin Enterprises owns 75% of the outstanding voting stock of Seagull, which was purchased in 2001 at a cost equal to 75% of the book value of Seagull 's net assets (At that date, the fair value and book value of Seagull 's net assets were equal.) Separate company income statements accounts for Penguin and Seagull for the year ended December 31, 2020 are summarized as follows:

Penguin Seagull

Sales Revenue $6,000,000 $2,000,000

Cost of Goods Sold (4,000,000) (1,000,000)

Expenses (1,125,000) (500,000)

During 2020, the companies agreed to sell inventory to each other as needed at a markup of 10% of cost. Penguin sold merchandise that cost $250,000 to Seagull for $275,000, and Seagull sold inventory that cost $200,000 to Penguin for $220,000. Half of this merchandise remained in each company's inventory at December 31, 2020.

Required:

1. Determine Penguin 's income from Seagull for 2020.
2. Prepare a consolidated income statement for Penguin Corporation and Subsidiary for 2020. (9 Marks)