In consolidation of Perpetual Industries and Sand Hill Company at December 31,2012, you assemble the following data related to unconfirmed intercompany profits:

The equipment is carried on the purchasing affiliate's books at $7,200,000 with accumulated depreciation of $3,600,000 (straight-line, no salvage value) at December 31,2012. Accumulated depreciation at the date of intercompany sale was $2,000,000; the original intercompany gain was $1,200,000. Perpetual owns 80 percent of Sand Hill.
Required
a. Assume that all of the above unconfirmed intercompany profits arose from upstream sales. Prepare the eliminating entries related to these intercompany transactions when consolidating the financial statements of Perpetual Industries and Sand Hill Company at December 31,2012.
b. Repeat part a assuming that all of the above unconfirmed intercompany profits arose from downstream sales

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January 1, 2012 December 31, 2012 $2,500,000 1,400,000 800,000 $%2,500,000 3,200,000 600,000