Question
PROBLEM 6-4 Upstream and Downstream Sales Pace Company owns 85% of the outstanding common stock of Sand Company and all the outstanding common stock of
PROBLEM 6-4 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 2012, 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, 2011, and December 31, 2012, inventories of the individual companies: Intercompany Profit in December 31, 2011, 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, 2012, 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
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