Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various health stores during the year.

Required

a. Give the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale of gnarl roots.

b. Give the worksheet consolidation entries needed as of December 31, 20X7, to remove all effects of the intercompany transfer in preparing the 20X7 consolidated financial statements.