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PROBLEM 64 Upstream and Downstream Sales L02 Pace Company owns 85% of the outstanding common stock of Sand Company and all the outstanding common stock of Star Company. During 2012, the affiliates engaged in inter- company sales as follows L05 Sales of Merchandise Pace to Sand Sand to Pace Sand to Star Star to Pace $ 40,000 60,000 75,000 50,000 $225,000 The following amounts of intercompany profits were included in the December 31 2011, and December 31, 2012, inventories of the individual companies Intercompany Profit in December 31, 2011, Inventory of Selling Company Pace Sand Star Total $7,000 Pace Company Sand Company Star Company $ 5,000 8,000 $13,000 $ 7,000 8,000 8,000 $23,000 $3,000 Total $7,000 $3,000