Problem $6-20($Algo$)$ Correction of Consolidation Entries LO $6-4$

In preparing the consolidation worksheet for Pencil Corporation and its $60$ percent$-$owned subsidiary, Stylus Company, the following

consolidation entries were proposed by Pencil's bookkeeper:

To eliminate the unpaid balance for intercorporate inventory sales in $205.$

To eliminate unrealized inventory profits at December $31,205.$

To eliminate intercompany sales for $205.$

Pencil's bookkeeper recently graduated from Oddball University, and although the dollar amounts recorded are correct, he had some

confusion in determining which accounts needed adjustment. All intercorporate sales in $20$X$5$ were from Stylus to Pencil, and Stylus

sells inventory at cost plus $40$ percent of cost$.$ Pencil uses the fully adjusted equity method in accounting for its ownership in Stylus.

Required:

a$.$ What percentage of the intercompany inventory transfer was resold prior to the end of $205?$

Note: Do not round your intermediate calculations. Round your final answer to nearest whole percentage.

Intercompany inventory

b$.$ Prepare the appropriate consolidation entries needed at December $31,205,$ to prepare consolidated financial statements.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Do not round

intermediate calculations.

Consolidation

Worksheet Entries

A Record the entry to eliminate intercompany receivable$/$payable$.$