Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1, 2014, when the book values of Shenley's assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets. During 2014, Pouch sold merchandise that cost $70,000 to Shenley for $86,000. On December 31, 2014, three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory. Separate incomes (investment income not included) of the two companies are as follows:

The consolidated income statement for Pouch Corporation and subsidiary for the year ended December 31, 2014 will show consolidated cost of sales of

		$148,000.
		$120,000.
		$210,000.
		$136,000.

Sales Revenue Cost of Goods Sold Operating Expenses Separate incomes Pouch Sherley $160,000 $180,000 90,000 120,000 17.000 21.000 $43 49,000 43,000