Tern Corporation acquired a 90% interest in Harbor Corporation several years ago when Harbor's book values and fair values were equal to one another. Seperate company income statements for Tern and Harbor for the year ended December 31, 2017 are summarized as follows:

	Tern	Harbor
Sales Revenue	1,000,000	600,000
Income from Harbor	85,000
Cost of Goods sold	600,000	300,000
Expenses	200,000	200,000
Net Income	285,000	100,000

During 2016, Tern sold merchandise that cost $150,000 to Harbor for $220,000. Half of this merchandise remained in Harbor's inventory at December 31, 2016. During 2017, Tern sold merchandise that cost $180,000 to Harbor for $270,000. One-third of this merchandise remained in Harbor's December 31, 2017 inventory. The beggining inventory was sold during 2017.

REQUIRED: Prepare a consolidated income statement for Tern corporation and subsidiary for 2017 by preparing a consolidated worksheet. Please show all work.