Pastern Industries Has an 80% Ownership Stake in Sascon Incorporated

question 37

Essay

Pastern Industries has an 80% ownership stake in Sascon Incorporated.At the time of purchase, the book value of Sascon's assets and liabilities were equal to the fair value.The cost of the 80% investment was equal to 80% of the book value of Sascon's net assets.At the end of 2011, they issued the following consolidated income statement:
Shortly after the statements were issued, Pastern discovered that the 2011 intercompany sales transactions had not been properly eliminated in consolidation.In fact, Pastern had sold inventory that cost $80,000 to Sascon for $90,000, and Sascon had sold inventory that cost $50,000 to Pastern for $65,000.Half of the products from both transactions still remained in inventory at December 31, 2011.
Required: Prepare a corrected income statement for Pastern and Subsidiary for 2011.

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Definitions:

Self-reinforcement

The process through which individuals reward themselves for achieving personal goals or performing well.

Personal Goal Setting

The process of identifying something that one aims to achieve personally, and planning the steps necessary to achieve it.

Constructive Thought Patterns

Positive and productive ways of thinking that contribute to individual well-being and effective problem-solving.

Self-leadership

The practice of intentionally influencing one's own thinking, behavior, and feelings to achieve personal goals, often involving self-motivation and self-direction.