Question: Several years ago Revnon Co acquired a 60 interest in

Several years ago, Revnon Co. acquired a 60% interest in Aumets Inc. at book value. During 2012 and 2013, intragroup sales of merchandise amounted to $120,000 and $180,000. On December 31, 2012, and December 31, 2013, one third of each year’s intragroup sales remained in that year’s ending inventory. Intragroup sales were made at the same rate of gross margin as sales to non-affiliates. January 1, 2012, inventories contained no unrealized intragroup profits.
The following data are taken from the financial statements of the two companies for 2012 and 2013:
The tax rate for both companies is 40%.
Calculate Revnon’s share of consolidated net income for 2012 and 2013 assuming:
(a) The intragroup sales were upstream.
(b) The intragroup sales were downstream.

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