Exercise # 3

Selected information from the separate and consolidated balance sheets and income statements of Palo Alto, Inc. and its wholly owned subsidiary, Stanford Co., as of December 31, 2020, and for the year then ended is as follows:

	Palo Alto	Stanford	Consolidated
Balance sheet accounts:
Accounts receivable	$ 26,000	$ 19,000	$ 42,000
Inventory	30,000	25,000	50,000
Investment in Stanford	67,000	--	--
Stockholders' equity	154,000	50,000	154,000
Income statement accounts:
Revenues	$200,000	$140,000	$300,000
Cost of goods sold	150,000	110,000	225,000
Gross profit	50,000	30,000	75,000
Equity in earnings of Stanford	$ 9,000	--	--
Net income	$ 36,000	$ 20,000	$ 36,000

Additional information:

During 2020, Palo Alto sold goods to Stanford at the same markup on cost that Palo Alto uses for all sales. At December 31, 2020, Stanford had not paid for all of these goods and still held 50% of them in inventory.

Palo Alto acquired its interest in Stanford five years earlier (Jan. 1, 2016).

Required:

For each of the following items, calculate the required amount.

a.	The amount of intercompany sales from Palo Alto to Stanford during 2020.
b.	The amount of Stanford's payable to Palo Alto for intercompany sales as of December 31, 2020.
c.	In Palo Alto's December 31, 2020, consolidated balance sheet, the carrying amount of the inventory that Stanford purchased from Palo Alto.