Reference no: EM132792835

On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT's retained earnings were $1,100,000. There was no acquisition differential. PAT accounts for its investment under the cost method. SAT sells inventory to PAT on a regular basis at a markup of 30% of selling price. The intercompany sales were $170,000 in Year 2 and $200,000 in Year 3. The total amount owing by PAT related to these intercompany sales was $70,000 at the end of Year 2 and $60,000 at the end of Year 3. On January 1, Year 3, the inventory of PAT contained goods purchased from SAT amounting to $80,000, while the December 31, Year 3, inventory contained goods purchased from SAT amounting to $90,000. Both companies pay income tax at the rate of 40%.

Selected account balances from the records of PAT and SAT for the year ended December 31, Year 3, were as follows:

                                                                            PAT                      SAT

Inventory                                               $520,000        $500,000
Accounts payable                                    800,000          520,000
Retained earnings, beginning of year          2,600,000         1,300,000
Sales                                                     4,200,000         2,700,000
Cost of sales                                            3,300,000         1,900,000
Income tax expense                                 280,000                  250,000

problem1 : Determine the amount to report on the Year 3 consolidated financial statements for the selected accounts noted above.