Preparing a consolidated income statement

For the year ended December 31, 20Y2, the operating results of Paley Corporation and its wholly owned subsidiary, Sims Enterprises, are as follows:

Line Item Description	Paley Corporation	Sims Enterprises
Sales	3,200,000	900,000
Cost of goods sold	(1,900,000)	(550,000)
Gross profit	1,300,000	350,000
Operating expenses	(750,000)	(125,000)
Operating income	550,000	225,000
Interest revenue	20,000
Interest expense		(15,000)
Net income	570,000	210,000

During 20Y2, Sims Enterprises sold and received payment of $80,000 for merchandise that was purchased by Paley Corporation. The merchandise sold to Paley cost Sims Enterprises $45,000. Paley Corporation sold the merchandise to another (nonaffiliated) company for $110,000.

a. Prepare a consolidated income statement for Paley Corporation and Subsidiary. Hint: Eliminate the effect of the intercompany sale.

Paley Corporation and Subsidiary Consolidated Income Statement For the Year Ended December 31, 20Y2

Line Item Description	Amount
Interest revenueInterest expenseInventoryOperating expensesSalesSales	$fill in the blank 2
Cost of goods soldInterest revenueInterest expenseInventoryOperating expensesCost of goods sold	fill in the blank 4
Gross profitGross lossNet incomeNet lossOperating incomeGross profit	$fill in the blank 6
Interest revenueInterest expenseInventoryOperating expensesSalesOperating expenses	fill in the blank 8
Gross profitGross lossNet incomeOperating lossOperating incomeOperating income	$fill in the blank 10
Other revenue and expense:
Cost of goods soldInterest revenueInventoryOperating expensesSalesInterest revenue	fill in the blank 12
Cost of goods soldInterest expenseInventoryOperating expensesSalesInterest expense	fill in the blank 14
Gross profitGross lossNet incomeNet lossOperating incomeNet income	$fill in the blank 16