book values equal to fair values. P uses the cost method to record its investment in S$.$ For external reporting purposes consolidated statements are required. However, the purchase did result in the creation of goodwill of $$55,000.$ Both companies use a $25\%$ tax rate. During the past few years, a number of transactions have taken place:

$1)$ Inter$-$company downstream sales during $2025$ were $200,000.$ An unrealized profit of $18,000$ still remains in the unsold ending inventory. The beginning inventory included an unrealized profit of $9,000$ related to last year$$s downstream inter$-$company sales.

$2)$ Inter$-$company upstream sales during $2025$ were $70,000.$ An unrealized profit of $8,000$ remains in the unsold ending inventory. There were no inter$-$company upstream sales last year.

$3)$ On January $3,2023,$ P sold equipment to S for $100,000.$ The equipment had a net book value of $$75,000$ and a remaining useful life of $10$ years on the date of sale.

$4)$ On July $8,2025,$ S sold land to P for $$167,000.$ The land had a book value of $$155,000.$ The land remained within the consolidated entity for the entire $2025$ year.

$5)$ Goodwill impairment for $2025$ was $5,500.$

$6)$ The following financial information is available for the year ending Dec $31,2025$:

P

S

Net Income

$125000$

$62,000$

Dividends Paid

$25,000$

$10,000$

REQUIRED:

Prepare an intercompany profit analysis schedule $2025$ to show before tax, tax and after$-$tax impacts of inter$-$company inventory, land and equipment sales. $(9$ marks$)$

Use your schedule in part $1$ above to calculate consolidated net income for $2025.$ Show attribution to both shareholder groups. $(8$ marks$)$

Assume depreciation expense for each of P and S is as follows for $2025$:

Depreciation expense $($P$)=30,000$

Depreciation expense $($S$)=25,000$

Find consolidated depreciation expense on the consolidated income statement for $2025.(2$ marks$)$