Upstream and Downstream Sales Pace Company owns 85% of the outstanding common stock of Sand Company and all the outstanding common stock of Star Company. During 2005, the affiliates engaged in intercompany sales as follows: LO5 Sales of Merchandise Pace to Sand $ 40,000 Sand to Pace 60,000 Sand to Star 75,000 Star to Pace 50,000 $225,000 The following amounts of intercompany profits were included in the December 31, 2004, and December 31, 2005, inventories of the individual companies:
Intercompany Profit in December 31, 2004, Inventory of Selling Company Pace Sand Star Total Pace Company $7,000 $ 7,000 Sand Company $ 5,000 $3,000 8,000 Star Company 8,000 8,000 Total $13,000 7,000 3,000 $23,000 Intercompany Profit in December 31, 2005, Inventory of Selling Company Pace Sand Star Total Pace Company $2,000 $ 2,000 Sand Company $ 6,000 $9,000 15,000 Star Company __ 4,000 4,000 Total $10,000 $2,000 $9,000 $21,000 Income from each company’s independent operations (including sales to affiliates) for the year ended December 31, 2005, is presented here:
Pace Company $200,000 Sand Company 150,000 Star Company 125,000 Required:
A. Prepare in general journal form the workpaper entries necessary to eliminate intercompany sales and intercompany profit in the December 31, 2005, consolidated financial statements workpaper.
B. Calculate the balance to be reported in the consolidated income statement for the following line items:
Combined income Noncontrolling interest in combined income Consolidated net income (controlling interest)