Exercise 3 (LO 2) Distribution of income with inventory profits. Norco Company is an 80%-owned subsidiary of Victory Corporation. The separate income statements of the two companies for 2016 are as follows: Victory Norco Corporation Company Sales $ 220,000 $ 150,000 Cost of goods sold. (150,000) (112,500) Gross profit.. $ 70,000 $ 37,500 Other expenses (40,000) (15,000) Other income. 5,000 Operating income $ 35,000 $ 22,500 Subsidiary income. 14,400 Net income $ 49,400 $ 22,500 The following facts apply to 2016: a. Norco Company sold $90,000 of goods to Victory Corporation. The gross profits on sales to Victory and to unrelated companies are equal and have not changed from the previous years. b. Victory Corporation held $20,000 of the goods purchased from Norco Company in its beginning inventory and $30,000 of such goods in ending inventory. c. Victory Corporation billed Norco Company $5,000 for computer services. The charge was expensed by Norco Company and treated as other income by Victory Corporation. Prepare the consolidated income statement for 2016, including the distribution of the con- solidated net income to the controlling and noncontrolling interests. The supporting income distribution schedules should be prepared as well