Issuing PCO Statements Selected items from the financial statements of Poly Inc. and Soly Inc., a 70%-owned subsidiary of Poly, at 12/31/06, are as follows:

Poly Inc. Soly Inc.

Income Statement Sales Cost of

.

sales .

Intercompany sales .

Intercompany cost of sales .

Net income .

Statement of Retained Earnings Dividends declared .

Balance Sheet Inventory — intercompany acquired Investment in subsidiary, 1/1/06. ,

$150,000 (90,000)

500,000

$ 280,000 (125,000)

100,000

-0-

25,000 1. Calculate the unrealized intercompany profit at the end of 2006.

2. If the parent issued PCO statements in addition to consolidated statements, what amounts would appear in the PCO statements as a result of (1) the intercompany inventory transfers, (2)

Soly’s operations, and (3) Poly’s investment in Soly? 3. Repeat requirement 2, but assume that the transfers are upstream.