Placid Lake Corporation acquired 90 percent of the outstandingvoting stock of Scenic, Inc., on January 1, 2017, when Scenic had anet book value of $490,000. Any excess fair value was assigned tointangible assets and amortized at a rate of $7,000 per year.

Placid Lake's 2018 net income before consideration of itsrelationship with Scenic (and before adjustments for intra-entitysales) was $390,000. Scenic reported net income of $200,000. PlacidLake declared $190,000 in dividends during this period; Scenic paid$49,000. At the end of 2018, selected figures from the twocompanies' balance sheets were as follows:

	Placid Lake			Scenic
Inventory	$	230,000		$	99,000
Land		690,000			290,000
Equipment (net)		490,000			390,000

During 2017, intra-entity sales of $120,000 (original cost of$60,000) were made. Only 30 percent of this inventory was stillheld within the consolidated entity at the end of 2017. In 2018,$180,000 in intra-entity sales were made with an original cost of$68,000. Of this merchandise, 40 percent had not been resold tooutside parties by the end of the year.

Each of the following questions should be considered as anindependent situation for the year 2018.

1. What is consolidated net income for Placid Lake and itssubsidiary?

2. If the intra-entity sales were upstream, how would consolidatednet income be allocated to the controlling and noncontrollinginterest?

3. If the intra-entity sales were downstream, how wouldconsolidated net income be allocated to the controlling andnoncontrolling interest?

4. What is the consolidated balance in the ending Inventoryaccount?

5. Assume that no intra-entity inventory sales occurred betweenPlacid Lake and Scenic. Instead, in 2017, Scenic sold land costing$39,000 to Placid Lake for $68,000. On the 2018 consolidatedbalance sheet, what value should be reported for land?

1. f-1. Assume that no intra-entity inventory orland sales occurred between Placid Lake and Scenic. Instead, onJanuary 1, 2017, Scenic sold equipment (that originally cost$190,000 but had a $69,000 book value on that date) to Placid Lakefor $98,000. At the time of sale, the equipment had a remaininguseful life of five years. What worksheet entries are made for aDecember 31, 2018, consolidation of these two companies toeliminate the impact of the intra-entity transfer?

2. f-2. For 2018, what is the noncontrollinginterest’s share of Scenic’s net income?