Question - Java Company acquired 70 % of Richie Corporation on 1/13. Fair values of Richie's assets and liabilities approximated book values on that date. Java uses the initial value method to account for its investment in Richie. On 1/14, Java bought equipment from Richie for $60,000 that had originally cost Richie $125,000 and had $ 74,000 of Accumulated depreciation at the time. The equipment had a five-year remaining life and was being depreciated using the straight line method. You are preparing the worksheet for the 2015 fiscal year.

a. Was this equipment sale upstream or downstream?

b. How much unrealized net gain from the equipment transfer remains at the beginning of 2015?

c. Which company's Retained earnings account will be adjusted in the *TA entry in part a?

d. How much excess depreciation will there be in each of the first five years after the transfer?

e. Java's 2015 net income, without including any investment income, was $ 325,000 and Richie reported net income of $ 100,000 in 2015. What consolidated income will be reported before removing the non-controlling interest's share of the subsidiary's net income? (This includes the effect of the ED entry.)

f. What will the non-controlling interest's share of the subsidiary's net income before 2015? (Consider whether the equipment sale had been upstream or downstream.)

Please support your answer with explanation.