Q3: Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were compared to their fair values. Polars acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transfer. Annual amortization expense resulting from this acquisition is 24,000. The following selected account balances were from the individual financial records of these two companies as of December 31, 2018:

Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $70,000 in 2017 and $112,000 in 2018. Of this inventory, $29,000 of the 2017 transfers were retained and then sold by Polar in 2018, whereas $49,000 of the 2018 transfers was held until 2019.

Please provide the consolidation entries in 2018 related to intra-entity sales of inventory.

From above income statement of Icecap, calculate Icecaps NI first, then determine Equity income from Icecap (in above Polars trial balances, investment income is not given) if Polar applies equity method for this investment.

If the intra-entity transfer of inventory is changed to downstream transfer, how would Equity income from Icecap amount be different from above question 2.