Akron, Inc., owns all outstanding stock of Toledo corporation. Amortization expense of 15,000 per year for patented technology resulted from the original acquisition. For 2011, the companies had the following accounts balances:
Akron Toledo
Sales.................................................1,100,000 600,000
Cost of goods sold..........................500,000 400,00
Operating Expenses......................400,000 220,000
Investment income.......................not given 0
Dividend paid..................................80,000 30,000
Intra entity sales of 320,000 occurred during 2010 and again in 2011. This merchandise cost 240,000 each year. Of the total transfer, 70,000 was still held on December 31, 2010, with 50,000 unsold on December 31, 2011.
a. For consolidation purposes, does the direction of the transfers (upstream or downstream)affect the balances to be reported here?
b. Prepare a consolidated income statement for the year ending December 31, 2011.