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Baywatch Industries has owned 80 percent of Tubberware Corporation for many years. On January 1, 20X6. Baywatch paid Tubberware $231,000 to acquire equipment that Tubberware

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Baywatch Industries has owned 80 percent of Tubberware Corporation for many years. On January 1, 20X6. Baywatch paid Tubberware $231,000 to acquire equipment that Tubberware had purchased on January 1, 20X3, for $261,000. The equipment is expected to have no scrap value and is depreciated over a 15-year useful life. Baywatch reported operating earnings of $120,000 for 20X8 and paid dividends of $40,000. Tubberware reported net income of $43,000 and paid dividends of $24,000 in 20X8. Required: a. Compute the amount reported as consolidated net income for 20X8. b. By what amount would consolidated net income change if the equipment sale had been a downstream sale rather than an upstream sale? c. Prepare the consolidation entry or entries required to eliminate the effects of the intercompany sale of equipment in preparing a full set of consolidated financial statements at December 31, 20X8

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