Baywatch Industries purchased 80 percent ownership of Tubberware Corporation on January 1, 20X0, at underlying book value. On January 1, 20X6, Baywatch paid \(\$ 270,000\) to Tubberware to acquire equipment that Tubberware had purchased on January 1, 20X3, for \(\$ 300,000\). The equipment is expected to have no scrap value and is depreciated over a 15 -year useful life.

Baywatch reported operating earnings of \(\$ 100,000\) for \(20 \mathrm{X} 8\) and paid dividends of \(\$ 40,000\). Tubberware reported net income of \(\$ 40,000\) and paid dividends of \(\$ 20,000\) in \(20 \mathrm{X} 8\).

\section*{Required}

a. Compute the amount reported as consolidated net income for \(20 \mathrm{X} 8\).

b. By what amount would consolidated net income change if the equipment sale had been a downstream sale rather than an upstream sale?

c. Give the eliminating entry or entries required to eliminate the effects of the intercompany sale of equipment in preparing a full set of consolidated financial statements at December 31, 20X8.