Intercompany Transactions

Facts:?Sub Co is a 90% owned subsidiary of Parent Co, acquired for $94,500 cash on July 1, 2016, when Sub?s net assets consisted of $100,000 capital stock and $5,000 retained earnings. The cost of Parent Co.?s 90% interest in Sun was equal to book value and fair value of the interest acquired. Parent Co sells inventory items to Sub Co on a regular basis, and the intercompany transaction data for 2019 are as follows:

? ? ? ? ? Sales to Sub Co in 2019 (cost $15,000), selling price	$20,000
? ? ? ? ? Unrealized profit in Sub Co.'s inventory at December 31, 2018
? ? ? ? ? ? ?(inventory was sold during 2019)	2,000
? ? ? ? ? Unrealized profit in Sub Co.'s inventory at December 31, 2019	2,500
? ? ? ? ? Sub Co.'s accounts payable to Parent Co at December 31, 2019	10,000

At December 31, 2018, Parent Co.'s investment in subsidiary account had a balance of $128,500. This balance consisted of Parent Co's 90% equity in Sub's $145,000 net assets on that date less $2,000 unrealized profit in Sub's December 31, 2018 inventory. During 2019 Parent Co made the following entries in its records for its investment in Sub:

	DR	CR
Cash	9,000
? ?Investment in subsidiary		9,000
To record dividends from Sub Co ($10,000 * 90%)
Investment in subsidiary	26,500
? ?Income from subsidiary		26,500
To record income from Sub Co for 2019 as follows: ? ?Equity in Sub Co.?s net income ($30,000 * 90%) ? ? ? ? ? ? ? ? ? ? ? ? $27,000 ? ?Add: 2018 inventory profit recognized in 2019 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?2,000 ? ?Less: 2019 inventory profit deferred at year-end ? ? ? ? ? ? ? ? ? ? ? (2,500) ? ? ? Total ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? $26,500

The 2018 intercompany sales that led to the unrealized inventory profits were recognize in 2019 and the full amount of the unrealized inventory profit originating in 2019 is deferred at December 31, 2019. Parent Co.?s investment in Sub Co increased from $128,500 at January 1, 2019 to $146,000 at December 31, 2019, the entire change consisting of $26,500 income less $9,000 dividends for the year.

Required:?Using the Excel file ?Case 1 - Advanced accounting topics? and the worksheet ?Intercompany,? prepare and show the required adjusting and eliminating journal entries (in journal entry form) and complete the worksheet, posting the journal entries to the worksheet and completing the Consolidated column with the totals.

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Intercompany Transactions Income Statement Net sales Income from subsidiary Total revenue Expenses Cost of goods sold Other expenses Total expenses Statement of Retained Earnings Beginning retained earnings Net Income Dividends Ending retained earnings Consolidated net income Noncontrolling Interest share Controlling share of net Incom_ 126,500 Balance Sheet Assets Cash Accounts receivable, net Inventory Other current assets Total current assets Plant and equipment, net Investment in subsidiary Total assets Liabilities & Stockholders' Equity Accounts payable Other liabilities Total current liabilities Separate Company Financial Statements Parent Subsidiary 1,000,000 26,500 1,026,500 Common stock Retained earnings Noncontrolling Interest 550,000 350,000 900,000 126,500 194,000 126,500 (50,000) 270,500 30,000 70,000 90,000 64,000 254,000 800,000 146,000 1,200,000 80,000 49,500 129,500 800,000 270,500 0 Total stockholders' equity 1,070,500 Total llab & stockholders' eq 1,200,000 JOURNAL ENTRIES 300,000 0 300,000 200,000 70,000 270,000 30,000 30,000 45,000 30,000 (10,000) 65,000 5,000 20,000 45,000 10,000 80,000 120,000 0 200,000 15,000 20,000 35,000 100,000 65,000 0 165,000 200,000 Adjustments and Eliminations DR DR CR CR Consolidated Intercompany Transactions Income Statement Net sales Income from subsidiary Total revenue Expenses Cost of goods sold Other expenses Total expenses Statement of Retained Earnings Beginning retained earnings Net Income Dividends Ending retained earnings Consolidated net income Noncontrolling Interest share Controlling share of net Incom_ 126,500 Balance Sheet Assets Cash Accounts receivable, net Inventory Other current assets Total current assets Plant and equipment, net Investment in subsidiary Total assets Liabilities & Stockholders' Equity Accounts payable Other liabilities Total current liabilities Separate Company Financial Statements Parent Subsidiary 1,000,000 26,500 1,026,500 Common stock Retained earnings Noncontrolling Interest 550,000 350,000 900,000 126,500 194,000 126,500 (50,000) 270,500 30,000 70,000 90,000 64,000 254,000 800,000 146,000 1,200,000 80,000 49,500 129,500 800,000 270,500 0 Total stockholders' equity 1,070,500 Total llab & stockholders' eq 1,200,000 JOURNAL ENTRIES 300,000 0 300,000 200,000 70,000 270,000 30,000 30,000 45,000 30,000 (10,000) 65,000 5,000 20,000 45,000 10,000 80,000 120,000 0 200,000 15,000 20,000 35,000 100,000 65,000 0 165,000 200,000 Adjustments and Eliminations DR DR CR CR Consolidated