Pappy Co. owns 80% of Son Inc. During the current year, the following intercompany transactions took place:

• Son paid Pappy $48,000 for rent of office space.

• Pappy sold Son $100,000 of inventory with a gross margin of 20%. At year end, Son had sold all the goods to unrelated parties.



On their separate entity financial statements, Pappy reported net income of $875,000 and Son reported net income of $650,000.

Based on the information provided, how much would be reported as consolidated net income?

a) $1,377,000

b) $1,457,000

c) $1,505,000

d) $1,525,000