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 account balances:

Intra-entity sales of $320,000 occurred during 2010 and again in 2011. This merchandise cost $240,000 each year. Of the total transfers, $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.

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Akron Sales Cost of goods sold Operating expenses Investment income Dividends paid Toledo $600,000 400,000 220,000 $1,100,000 500,000 400,000 Not given 80,000 30,000