Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 3

Akron, Inc., owns all outstanding stock of Toledo Corporation.Amortization expense of $15,000 per year for patented technology resulted from the original acquisition.For 2011, the companies had the following account balances:
Intra-entity sales of $320,000 occurred during 2010 and again in 2011.This merchandise cost $240,000 each year.Of the total transfers, $70,000 was still held on December 31, 2010, with $50,000 unsold on December 31, 2011.
a.For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here
b.Prepare a consolidated income statement for the year ending December 31, 2011.