PARENT Company purchased a piece of land costing $1,000,000 from SUBSIDIARY Company for $1,500,000. On December 31, 2017, PARENT Company sold this land to an unrelated paty for $1,500,000. On the other hand, on July 1, 2017, PARENT
On January 2, 2016, PARENT Company acquired 90% of the outstanding shares of SUBSIDIARY Company at book value. During 2016 and 2017, intercompany sales amounted to $2,000,000 and $4,000,000 respectively. SUBSIDIARY Company consistently recognized a 25% mark up based on sales while PARENT Company had a 25% gross profit on cost. The inventories of the buying affiliate, which all came from intercompany trasactions show:
| Dec. 31, 2016 | Dec. 31, 2017 | |
| PARENT Company | 240,000 | 160,000 |
| SUBSIDIARY Company | 100,000 | 40,000 |
On October 1, 2016, PARENT Company purchased a piece of land costing $1,000,000 from SUBSIDIARY Company for $1,500,000. On December 31, 2017, PARENT Company sold this land to an unrelated paty for $1,500,000. On the other hand, on July 1, 2017, PARENT Company sold a used machine with a carrying value of $60,000 and remaining life of 3 years to SUBSIDIARY Company for $42,000.
Separate Statement of Comprehensive Income for the two companies for 2017 follow:
| PARENT COMPANY | SUBSIDIARY COMPANY | |
| Sales | 14,040,000 | 25,000,000 |
| Cost of goods sold | 8,400,000 | 15,000,000 |
| Gross profit | 5,640,000 | 10,000,000 |
| Operating expenses | 3,800,000 | 6,000,000 |
| Operating profit | 1,840,000 | 4,000,000 |
| Loss on sale of Machine | (18,000) | |
| Net Income | 1,822,000 | 4,000,000 |
Compute for the following amounts for/as of Dec. 31, 2017:
1. Consolidated Gross Profit
2. Consolidated Operating Expenses
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