P 5-6 Upstream and downstream sales, 90 percent owned Justin Bhd is a 90 percent-owned company of Epik Bhd and was acquired in 2011, when the book value of Justin Bhd’s net identifiable assets were equal to fair value. Information regarding inventory transactions between Justin Bhd and Epik Bhd is as follows:

■ In 2013, Justin Bhd sold inventories of $5,000,000 to Epik Bhd with 20 percent gross profit on it. At the end of the year, $200,000 inventories from Justin Bhd remained in Epik Bhd.

■ In 2014, Epik Bhd sold inventories of $8,000,000 to Justin Bhd. The gross profit on the sale was 10%. At the end of the year, $100,000 inventories from Epik Bhd were not sold to outside parties.

Trial balances for both companies for the year ended December 31, 2014 are as follows

(in thousands):

Debits Epik Bhd Justin Bhd Cash $ 1,200 $ 800 Accounts receivable 2,000 300 Dividends receivable 90 0 Inventory 1,000 2,300 Land 2,500 1,300 Equipment 1,200 500 Investment in Justin Bhd 3,474 0 Cost of sales 6,200 3,900 Other expenses 200 400 Dividends 200 100 Total $ 18,064 $ 9,600 Credits Accounts payable $ 900 $ 600 Dividends payable 0 100 Common stock 6,000 2,500 Retained Earnings 2,764 1,300 Sales 8,400 5,100 Total $ 18,064 $ 9,600 No dividends were paid by Justin Bhd during the year.

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