Assume that Pepperoni owns 70% of the voting stock of Sausage. On 12/31/20X4, Sausage purchased equipment from Pepperoni for $150,000. The equipment was originally purchased by Pepperoni for $200,000 on 1/1/X1. The building had a useful life of 10 years and both parties use the straight-line method of depreciation. Assume Sausage’s net income is $92,000.

1. Prepare the consolidation entry related to this transaction which should appear on the 20X4 worksheet.

2. Prepare the consolidation entry related to this transaction which should appear on the 20X5 worksheet.