B$10.$ Exercise $(20$ min$)$

Sorel is an $80\%-$owned subsidiary of Pattern Company. The

two affiliates had the following separate income statements

for $201$ and $202.$

B$10.$ Cont.

Sorel sells at the same gross profit percentage to all customers.

During $201,$ Sorel sold goods to Pattern for the first time in the

amount of $$120,000.$ $$30,000$ of these sales remained in

Pattern's ending inventory.

During $202,$ sales to Pattern by Sorel were $$150,000,$ of which

$$25,000$ sales were still in Pattern's December $31,20$x$2,$

inventory.

Requirements

Prepare worksheet eliminations entries necessary at the end

of the years to eliminate the effects of the $201$ and $202$

intercompany sales.

Prepare IDS of both companies for the $201$ and $202$

consolidations.