Hollow Corporation purchased 70 percent of the voting stock of Surg Corporation on May 18, 20X1, at underlying book value. The companies reported the following data with respect to intercompany sales in 20X4 and 20X5:

Hollow Corporation reported operating income (excluding income from its investment in Surg Corporation) of \(\$ 160,000\) and \(\$ 220,000\) in \(20 \mathrm{X} 4\) and 20X5, respectively. Surg Corporation reported net income of \(\$ 90,000\) and \(\$ 85.000\) in 20X4 and 20X5, respectively.
\section*{Required}

a. Compute consolidated net income for 20X4.

b. Compute the inventory balance reported in the consolidated balance sheet at December 31, 20X5, for the transactions shown above.

c. Compute the amount included in consolidated cost of goods sold for \(20 \mathrm{X} 5\) relating to the transactions shown above.

d. Compute consolidated net income for 20X5.

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Purchase Year Purchased by 20X4 Surg Corp. Price $120,000 Sold to Sale Price Unsold at End of Year Year Sold to Unaffiliated Co. Hollow Corp. $180.000 $ 45.000 20X5 20X5 Surg Corp. 90.000 Hollow Corp. 20X5 Hollow Corp. 140.000 Surg Corp. 135.000 280.000 30,000 20X6 110,000 20X6