[[PROBLEMS]]

On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT’s retained earnings were $900,000. 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 $150,000 in Year 2 and $180,000 in Year 3. The total amount owing by PAT related to these intercompany sales was $50,000 at the end of Year 2 and $40,000 at the end of Year 3. On January 1, Year 3, the inventory of PAT contained goods purchased from SAT amounting to $60,000, while the December 31, Year 3, inventory contained goods purchased from SAT amounting

to $70,000. Both companies pay income tax at the rate of 40%.

^{Selected account balances f r om the r eco r ds of P A T and S A T for the year ended}

^{December 31, Y ear 3, we r e as follows}

Required:

(a) Determine the amount to report on the Year 3 consolidated financial statements for the above noted accounts.

(b) Indicate how noncontrolling interest on the Year 3 consolidated income statement and Year 3 consolidated balance sheet will be affected by the intercompany transactions noted above.