Peter Corporation acquired an 80% interest in Stern Corporation several years ago when the book values and fair values of Stern's assets and liabilities were equal. At the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of Stern's net assets. Separate company income statements for Peter and Stern for the year ended December 31, 2014 are summarized as follows:

Required: Prepare a consolidated income statement for Peter Corporation and Subsidiary for 2014.

Stern $600,000 Sales Revenue Investment income from Stern Cost of Goods Sold Expenses Net Income Peter $1,000,000 85,000 (600,000) (200,000) $285,000 (300,000) (200,000) $100,000 During 2013, Peter sold merchandise that cost $120,000 to Stern for $180,000. Half of this merchandise remained in Stern's inventory at December 31, 2013. During 2014, Peter sold merchandise that cost $150,000 to Stern for $225,000. One-third of this merchandise remained in Stern's December 31, 2014 inventory