Pearl Company owns 60% of the voting shares of Jasper Inc. which it acquired on the latter's incorporation on January 1, 2012, and accounts for its investment using the cost method.The Income Statements for the two companies for the year ended December 31, 2012, are as follows:

Pearl Company

Jasper Inc.

Sales

$ 3,200,000

$ 1,200,000

Dividend income

60,000

-

3,260,000

1,200,000

Cost of sales

2,400,000

900,000

Other expenses

300,000

100,000

2,700,000

1,000,000

Income before tax

560,000

200,000

Income taxes

200,000

80,000

Net income for the year

$360,000

$120,000

The only intercompany transaction during 2012 was a sale of inventory from Pearl Company to Jasper Inc. for $400,000.Half of this was still in Jasper's inventory at December 31, 2012. Pearl Company earned a gross profit of 25% on the sale.Jasper Inc. paid dividends of $100,000 during 2012.Both companies pay income tax at a rate of 40%.

Required:

Prepare, in good form, an income statement for Pearl Company and its investee Jasper Inc. in accordance with International Financial Reporting Standards

a)if Jasper Inc. is reported as a joint venture (using the equity method).(5 marks)

b) if Jasper Inc. is reported as a subsidiary. (5 marks)