Harley Corporation owns 70% of the outstanding voting stock of Forbes Inc. At the date of Acquisition, Forbess retained earnings were $1,800,000. On December 31, Year 2, Harley sold equipment to Forbes at its fair value of $1,500,000 and recorded a gain of $500,000. The equipment had a remaining useful life of four years on the date of the intercompany transaction. This equipment was still held within the consolidated entity at the end of Year 4.

A the end of Year 4, selected figures from the two companies financial statements were as follows:

	Harley	Forbes
Equipment	$6,000,000	$3,000,000
Accumulated depreciation	1,700,000	1,450,000
Retained earnings, beginning of year	4,000,000	2,000,000
Depreciation expense	600,000	510,000
Net income	1,200,000	420,000
Dividends declared	250,000	80,000

Hurley uses the cost method to account for its investment in Forbes. Both companies pay income tax at the rate of 30%.

Required:

• Calculate the amount to be reported on the Year 4 consolidated financial statements for the accounts / items listed above.
• Now, assume that the Year 2 intercompany sale was upstream, that is, Forbes sold to Harley. Calculate the amount to be reported on the Year 4 consolidated financial statements for the accounts/ items listed above.