Exercise 1 (LO 1, 2) Gross profit: separate firms versus consolidated. Sorel is an 80%-owned subsidiary of Pattern Company. The two affiliates had the following separate income statements for 2015 and 2016.

	Sorel Company		Pattern Company
	2015	2016	2015	2016
Sales Revenue	250,000	350,000	500,000	540,000
Cost of Good Sold	150,000	210,000	310,000	360,000
Gross Profit	100,000	140,000	190,000	180,000
Expenses	45,000	66,000	120,000	125,000
Net Income	55,000	74,000	70,000	55,000

Sorel sells at the same gross profit percentage to all customers. During 2015, Sorel sold goods Pattern for the first time in the amount of $120,000. $30,000 of these sales remained in Pattern's ending inventory. During 2016, sales to Pattern by Sorel were $150,000, of which $25,000 sales were still in Pattern's December 31, 2016, inventory.

Prepare consolidated income statements including the distribution of income to the controlling and noncontrolling interest for 2015 and 2016.