Consolidation Entries: 100% Ownership — Downstream Transfers; Other Intercompany Transac¬

tions On 1/1/06, Pom Inc. created a 100%-owned subsidiary, Som Inc., with a $25,000 common stock investment.

Additional Information 1. During 2006, Pom sold inventory to Som at a profit. The markup percentage was 40% of the transfer price. At 12/31/06, Som had on hand intercompany-acquired inventory that had cost Pom $18,000. Downstream sales for 2006 totaled $160,000. Of this amount, Som had paid Pom $130,000 by year-end.

2. On 12/30/06, Pom allocated $4,000 of previously recorded advertising expense to Som, which received the allocation notice on 1/4/07.

3. During 2006, Pom charged Som $5,000 for management services, of which $3,000 had been paid by year-end.

4. On 12/29/06, Som declared a cash dividend of $10,000. The dividend was paid on 1/3/07.

5. Som reported retained earnings of $22,000 in its 12/31/06 balance sheet.

6. No other intercompany transactions occurred during 2006.

Prepare all consolidation entries at the end of 2006.