Pinto, Inc. owns 100% of Scale Inc. The following information is from the 2008 income statements of Pinto and Scale

Additional Information:
1. Pinto’s reported sales revenue includes \($200,000\) of intercompany sales to Scale. Scale sold three-fourths of this inventory to outside customers by the end of 2008. Pinto sells to Scale on terms similar those available to its outside customers.
2. Scale purchased equipment from Pinto for \($60,000\) on January 1, 2008. The equipment is depreciated using the straight-line method over eight years and no residual value is assumed.
Required:
1. How much intercompany profit should be eliminated from Scale’s inventory when preparing 2008 consolidated financial statements?
2. What amount of depreciation expense should be reported in the 2008 consolidated income statement?

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Pinto Scale Sales $1,000,000 $600,000 Cost of goods sold 600,000 540,000 Gross profit 400,000 60,000 Depreciation expense 60,000 15,000 Other expenses Income from operations Gain on sale of equipment to Scale Income before income taxes 130,000 30,000 210,000 15,000 16,000 $ 226,000 $ 15,000