The income statements of the parent company, P, and its subsidiary company, S are given below. P controls S with 80% ownership of its voting shares; P uses consolidated financial statement reporting. All amounts are in Canadian dollars for the year ended December 31, Year 8

P S

Sales $800,000 $348,000

Gain on capital asset sale 0 32,000

Dividend and interest income 50,000 0

850,000 380,000

Cost of goods sold 500,000 200,000

Gross Profit 350,000 180,000

Selling and Administrative Expenses (110,000) (70,000)

Amortization Expense (45,000) (35,000)

Income Tax Expense (62,000) (30,000)

Net Income $133,000 $45,000

The following information is available to help you prepare consolidated statements:

1) P uses the equity method to account for its investment in S.

2) At the time when P purchased its ownership interest in S, there was no acquisition differential.

3) The gain on sale of capital assets resulted from a sale from S to P on January 1, Year 8. S sold the capital assets to P for $192,000. The net book value of the equipment on S's books at that time was $160,000. The equipment was originally purchased by S on January 1, Year 4. S was amortizing the capital assets using the straight-line method over its estimated useful life of 12 years.

4) On September 28, Year 8, S declared and paid dividends of $50,000.

5) On October 31, Year 8, P sold inventory to S for $120,000. The original cost of the inventory when purchased by P was $80,000. At December 31, Year 8, 40% of the inventory remained in S's inventory.

6) Both P and S pay income tax at a rate of 30%.

Required:

a) Prepare an intercompany profit analysis schedule to show all intercompany profits before and after tax, as well as the tax effects for year 8.

b) Calculate consolidated net income for year 8 along with income attribution to each of P shareholders and NCI shareholders.

c) Calculate the consolidated balances that would appear on the consolidated income statement prepared by P for the year ended December 31, year 8 (show your calculations):

(i) Sales

(ii) Cost of Goods Sold

(iii) Income Tax Expense