Politan Company acquired an 80 percent interest in Soludan Company on January 1, 2010. Any portion of Soludan’s business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer.

Following are the individual financial statements for the two companies as well as consolidated totals for 2011:

a. What method does Politan use to account for its investment in Soludan?
b. What is the balance of the unrealized inventory gain deferred at the end of the current period?
c. What amount was originally allocated to the trademarks?
d. What is the amount of the current year intra-entity inventory sales?
e. Were the intra-entity inventory sales made upstream or downstream?
f. What is the balance of the intra-entity liability at the end of the current year?
g. What unrealized gain was deferred into the current year from the preceding period?
h. The beginning consolidated Retained Earnings account shows a balance of $611,600 rather than the $620,000 reported by the parent. What creates this difference?
i. How was the ending Noncontrolling Interest in Soludan Company computed?
j. With a tax rate of 40 percent, what income tax journal entry is recorded if the companies prepare a consolidated tax return?
k. With a tax rate of 40 percent, what income tax journal entry is recorded if these two companies prepare separate taxreturns?

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Company $ (800,000) $(600,000) $(1,280,000) Separate company net income(280,000 100,000 Consolidated net income Noncontrolling interest in Soludan Company's income .. Controlling interest in consolidated net income (274,800 Retained earnings, 1/1/11 Retained earnings, 12/31/11 (830,000) $370,000 (816.400) Investment in Soludan Company Land, buildings, and equipment ..-... (270,000) (60,000) 310,000) Noncontrolling interest in Retained earnings (above) 5 Total liabilities and equities