Use the following information to answer Questions 1 to 3:

On January 1, 20X5, Pepper Corp. purchased 85% of the outstanding voting common shares of Sand Inc. for $850,000 cash. On this date, Sand reported common shares of $400,000 and retained earnings of $500,000. Sands identifiable assets and liabilities had fair values equal to their carrying values. Additional information:

• The investment in the subsidiary was found to be impaired by $20,000 in 20X7. The entire impairment loss was allocated to goodwill.
• On January 1, 20X6, Sand sold a trademark to Pepper for $90,000. On this date, the trademark had a carrying value of $70,000 on the books of Sand and a remaining useful life of five years.
• On September 1, 20X8, Pepper sold land to Sand at a $30,000 gain. Sand still owns this land as of December 31, 20X8.
• During 20X8, Peppers inventory sales to Sand were $90,000. Sand still had $20,000 of this inventory on hand at December 31, 20X8. Inventory purchased from Pepper and still on hand at December 31, 20X7, was $7,000. Pepper prices intercompany sales to yield a 25% gross margin.
• During 20X8, Sands inventory sales to Pepper were $20,000. Pepper still had $8,000 of this inventory on hand at December 31, 20X8. Inventory purchased from Sand and still on hand at December 31, 20X7, was $4,000. Sands gross margin on sales is 30% for all intercompany transactions.
• Pepper paid dividends of $25,000 and Sand paid dividends of $35,000 in 20X8.
• Pepper uses the cost method to record its investment in Sand. Pepper applies the fair value entity (FVE) method for goodwill calculations.
• Sand has not had any changes to its common share account since acquisition.

The following are the statements of comprehensive income for the year ended December 31, 20X8, for Pepper and Sand:

Statements of comprehensive income For the year ended December 31, 20X8

	Pepper	Sand
Sales and other income	$940,000	$610,000
Cost of goods sold	730,000	397,000
Amortization expense	68,000	54,000
	142,000	159,000
Income tax expense (40%)	56,800	63,600
Net income and comprehensive income	$85,200	$95,400

Selected statement of financial position accounts for the companies at December 31, 20X8, are as follows:

	Pepper	Sand
Inventory	$95,000	$58,000
Property, plant, and equipment (net) (includes land)	416,000	397,000
Trademark (net)	32,000
Retained earnings	884,000	648,000

What is the consolidated cost of goods sold (COGS) to be reported on the statement of comprehensive income at December 31, 20X8?

Question 1 options:

	$1,012,550
	$1,019,670
	$1,021,450
	$1,131,450