Question: Pinto Inc. owns 100% of Scale Inc. The following information is from the 2014 income statements of Pinto and Scale:
Additional Information: 1. Pinto's reported sales revenue includes $200,000 of intra-entity sales to Scale. Scale sold three-fourths of this inventory to outside customers by the end of 2014. Pinto sells to Scale on terms similar those available to its outside customers.
2. Scale purchased equipment from Pinto for $60,000 on January 1, 2014. The equipment is depreciated using the straight-line method with no residual value and eight years of life remaining as of January 1, 2014.
Required: 1. How much intra-entity profit should be eliminated from Scale's inventory when preparing 2014 consolidated financial statements?
2. What amount of depreciation expense should be reported in the 2014 consolidated income statement?