On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT’s retained earnings...

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On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. whenSAT’s retained earnings were $1,000,000. There was no acquisitiondifferential. PAT accounts for its investment under the costmethod. SAT sells inventory to PAT on a regular basis at a markupof 30% of selling price. The intercompany sales were $160,000 inYear 2 and $190,000 in Year 3. The total amount owing by PATrelated to these intercompany sales was $60,000 at the end of Year2 and $50,000 at the end of Year 3. On January 1, Year 3, theinventory of PAT contained goods purchased from SAT amounting to$70,000, while the December 31, Year 3, inventory contained goodspurchased from SAT amounting to $80,000. Both companies pay incometax at the rate of 40%.
Selected account balances from the records of PAT and SAT forthe year ended December 31, Year 3, were as follows:
PAT SAT
Inventory $510,000 $400,000
Accounts Payable 700,000 420,000
Retained Earnings, Beg. of Year 2,500,000 1,200,000
Sales 4,100,000 2,600,000
Cost of Sales 3,200,000 1,800,000
Income Tax Expense 180,000 150,000
Determine the amount to report on the Year 3 consolidatedfinancial statements for the selected accounts noted above.

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Please hit LIKE button if this helped For any further explanation please put your query in comment will get back to you Intercompany balances Intercompany SalePurchase for Year 3 190000 a See Answer

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	PAT	SAT
Inventory	$510,000	$400,000
Accounts Payable	700,000	420,000
Retained Earnings, Beg. of Year	2,500,000	1,200,000
Sales	4,100,000	2,600,000
Cost of Sales	3,200,000	1,800,000
Income Tax Expense	180,000	150,000