Akron, Inc., owns all outstanding stock of Toledo Corporation. Amortization expense of $ 15,000 per year for patented technology resulted from the original acquisition. For 2010, the companies had the following account balances: LO8 Sales.

Cost of goods sold Operating expenses Investment income Dividends paid . . .

Akron

$1,100,000 500,000 400,000 Not given 80,000 Toledo

$600,000 400,000 220,000

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30,000 Intercompany sales of $320,000 occurred during 2009 and again in 2010. This merchandise cost $240,000 each year. Of the total transfers, $70,000 was still held on December 31, 2009, with $50,000 unsold on December 31, 2010.

a. For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here?

b. Prepare a consolidated income statement for the year ending December 31, 2010.