Smith's beginning and ending inventories contain unconfirmed profits on goods purchased from Pearson of $75,000 and $90,000, respectively. Pearson's beginning and ending inventories contain unconfirmed profits on goods purchased from Smith of $120,000 and $100,000, respectively. Smith owns 80% of Pearson. What is the effect on consolidated net income and the noncontrolling interest in net income?
Consolidated net income increases $5,000; noncontrolling interest in net income decreases $15,000.
Consolidated net income decreases $5,000; noncontrolling interest in net income increases $15,000.
Consolidated net income decreases $8,000; noncontrolling interest in net income increases $3,000.
Consolidated net income increases $5,000; noncontrolling interest in net income decreases $3,000.
None of the above.