E5-3 Downstream sales The separate incomes of Pil Corporation and Sil Corporation, a 100 percent-owned subsidiary of Pil, for 2012 are 000,000 and $1,000,000, respectively. Pil sells all of its output to Sil at 150 percent of Pil's cost of production. 2011 and 2012, Pil's sales to Sil were $9,000,000 and $7,000,000, respectively. Sil's inventory at Decem- 31.2011 ncluded $3,000,000 of the merchandise acquired from Pil, and its December 31,2012, inventory ded $2,400,000 of such merchandise. Assume Sil sells the inventory purchased from Pil in the following year ber A consolidated income statement for Pil Corporation and Subsidiary for 2012 should show controling inter share of consolidated net income of: a $2,200,000 b $2,800,000 c $3,000,000 d $3,200,000 USE THE FOLLOWING INFORMATION IN ANSWERING QUESTIONS 2 AND 3: Pan Corporation owns 75 percent of the voting common stock of Sat Corporation, acquired at book value dur- ing 2011 . Selected informa,tion from the accounts of Pan and Sat for 2012 are as follows: Pan Sat $1,800,000 $1,000,000 Sales Cost of sales 980,000 380,000 During 2012 Pan sold merchandise to Sat for $100,000, at a gross profit to Pan of $40,000. Half of this mer- chandise remained in Sat's inventory at December 31, 2012. Sat's December 31, 2011, inventory included unrealized profit of $8,000 on goods acquired from Pan