Consolidation Worksheet: Year of Equipment Transfer — Downstream (100% ownership) On 1/2/05, Pato Inc. sold equipment to its 100%-owned subsidiary, Sato Inc. Information relating to the sale follows:

Sales price . $35,000 Cost . $ 50,000 Less— Accumulated depreciation (6 years) . (30,000) 20,000 Gain . $15,000 Original life used by parent . 10 years Remaining life assigned by Sato . 5 years Comparative condensed financial statements follow:
Pato Inc. Sato Inc.
Income Statement (2005)
Sales Cost Expenses of .
sales .
.
Intercompany Accounts Equity in net income (of Sato) .
Intercompany Net Income gain .
.
Balance Sheet (as of 12/31/05)
Investment Accumulated Other Buildings assets and in .
depreciation equipment subsidiary .
.
.
Total Assets .
Common Liabilities Retained Total stock Liabilities earnings .
.
.
and Equity .
Dividends declared .
$ 440,000 (230,000)
(75,000)
$150,000 (80,000)
(40,000)
30,000 15,000 $ 180,000 $ 30,000 $ 80,000 250,000 (100,000) 620,000 $ (24,000) 75,000 59,000 $ 850,000 $110,000 $ 110,000 300,000 440,000 $ 30,000 45,000 35,000 $ 850,000 $110,000 $ 80,000 $ 20,000 Required 1. Determine the unrealized gain at year-end. {For Module 1 only: Also make the necessary yearend g/l adjusting entry for the unrealized gain required for this module; adjust the statements accordingly.) Prepare an analysis of the investment account for 2005.
2. Prepare all consolidation entries as of 12/31/05.
3. Prepare a consolidation worksheet at 12/31/05.