Smith Corporation acquired 80 percent of the outstanding voting stock of Kane, Inc., on January 1, 2010, when Kane had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year.
Reported net income for 2011 was $300,000 for Smith and $110,000 for Kane. Smith distributed $100,000 in dividends during this period; Kane paid $40,000. At year-end, selected figures from the two companies€™ balance sheets were as follows:


During 2010, intra-entity sales of $90,000 (original cost of $54,000) were made. Only 20 percent of this inventory was still held at the end of 2010. In 2011, $120,000 in intra-entity sales were made with an original cost of $66,000. Of this merchandise, 30 percent had not been resold to outside parties by the end of the year.
Each of the following questions should be considered as an independent situation.
a. If the intra-entity sales were upstream, what is the noncontrolling interest€™s share of the subsidiary€™s 2011 net income?
b. What is the consolidated balance in the ending Inventory account?
c. If the intra-entity sales were downstream, what is the noncontrolling interest€™s share of the subsidiary€™s 2011 net income?
d. If the intra-entity sales were downstream, what is the consolidated net income? Assume that Smith uses the initial value method to account for this investment.
e. If the intra-entity sales were downstream, what is the consolidated balance of the Retained Earnings account as of the end of 2011? Assume that Smith uses the partial equity method to account for this investment.
f. If the intra-entity sales were upstream, what is the consolidated balance for Retained Earnings as of the end of 2011? Assume that Smith uses the partial equity method to account for this investment.
g. Assume that no intra-entity inventory sales occurred between Smith and Kane. Instead, in 2010, Kane sold land costing $30,000 to Smith for $50,000. On the 2011 consolidated balance sheet, what value should be reported for land?
h. Assume that no intra-entity inventory or land sales occurred between Smith and Kane. Instead, on January 1, 2010, Kane sold equipment (that originally cost $100,000 but had a $60,000 book value on that date) to Smith for $80,000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2011, consolidation of these two companies to eliminate the impact of the intra-entity transfer? For 2011, what is the noncontrolling interest€™s share of Kane€™s netincome?

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Smith Corporation Kane, Inc. Inventory .. Land Equipment (net). Common stock Retained earnings, 12B1/11 $140,000 90,000 200,000 300,000 200,000 400,000 600,000 400,000 400,000 600,000