P 5-5 Upstream inventory sale, 100 percent owned On February 20, 2012, Angel AG acquired all common stock of Mark AG. The book value of Mark AG’s net assets was equal to fair value at the acquisition date. Mark AG regularly sold inventories to Angel AG with a 10 percent mark-up. In 2014, $200,000 of Angel AG’s beginning inventory was purchased from Mark AG. The trial balances of both companies for the year ended 2014 are as follows (in thousands):

Debits Angel AG Mark AG Cash $ 400 $ 100 Accounts receivable 300 200 Inventory 400 500 Plant Asset 4,900 3,600 Investment in Mark AG 4,000 —

Cost of sales 4,500 3,000 Other expenses 800 1,000 Dividends 300 200 Total $ 15,600 $ 8,600 Credits Accounts payable $ 1,200 $ 200 Common stock 3,000 2,000 Retained Earnings 4,400 1,400 Sales 7,000 5,000 Total $ 15,600 $ 8,600 25 percent of Angel AG’s ending inventories were purchased from Mark AG, and $1,100 of Mark AG’s sales were sales to Angel AG.

R E Q u I R E D : Prepare consolidation workpapers for Angel AG and Subsidiary for the year ended December 31, 2014.