Knight Corporation owns 100 percent of Spahn Company's voting shares. During 20X6, Spahn purchased inventory items for $20,000 and sold them to Knight for $50,000. Knight continues to hold the items in inventory on December 31, 20X6. Sales for the two companies during 20X6 totaled $300,000, and total cost of goods sold was $200,000.

Required 

a. If no adjustment is made to eliminate the intercorporate sale when a consolidated income statement is prepared for 20X6, by what amount will consolidated net income be overstated or understated?

b. Prepare a consolidated income statement for 20X6 without any adjustment for the intercorporate sale. 

c. Prepare a consolidated income statement for 20X6 adjusted for the intercorporate sale. 

d. What items in the consolidated income statements are different in requirements b and c?