PROBLEM 6-4 Upstream and Downstream Sales LO 2 LO5 Pace Company owns 85% of the outstanding common stock of Sand Company and all the out- standing common stock of Star Company. During 2020, the affiliates engaged in intercompany sales as follows: 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, 2019, and December 31, 2020, inventories of the individual companies: Intercompany Profit in December 31, 2019, 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