On July 1, Year 7, Parent purchased 40% of the outstanding bonds of Sub for $152,500. On that date, Sub had $400,000 of 10% bonds payable outstanding, which mature in five years. The bond discount on the books of Sub on July 1, Year 7, amounted to $20,000. Interest is payable January 1 and July 1. Any gains (losses) are to be allocated to each company. Both companies use the straight-line method to account for bonds.
Prepare a consolidated income statement for Year 7 using a 40% tax rate.