Pillar Corporation acquired 80 percent ownership of Stanley Wood Products Company on January 1. 20X1, for \(\$ 160,000\). On that date Stanley Wood Products reported retained eamings of \(\$ 50,000\) and had \(\$ 100,000\) of common stock outstanding. Pillar has used the equity method in accounting for its investment in Stanley.

Trial balance data for the two companies on December 31, 20X5, are as follows:

1. On the date of combination the fair value of Stanley's depreciable assets was \(\$ 50,000\) above book value. The purchase differential assigned to depreciable assets should be written off over the following 10 -year period.
2. There was \(\$ 10,000\) of intercorporate receivables and payables at the end of \(20 \times 5\).
\section*{Required}

a. Give all journal entries recorded by Pillar Corporation during 20X5 related to its investment in Stanley Wood Products.
\(b\). Give all eliminating entries needed to prepare consolidated statements for 20X5.

c. Prepare a three-part workpaper as of December 31, \(20 \times 5\).

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Pillar Corporation Stanley Wood Products Company Debit Item Debit Credit Credit Cash and Receivables $ 81.000 $ 65.000 Inventory 260.000 90.000 Land 80,000 80.000 Buildings and Equipment 500,000 150.000 Investment in Stanley Wood Products Stock 188,000 Cost of Goods Sold 120,000 50,000 Depreciation Expense 25.000 15.000 Inventory Losses 15.000 5.000 Dividends Declared Accumulated Depreciation Accounts Payable Notes Payable 30.000 10,000 $ 205.000 $105.000 60.000 20,000 200,000 50,000 Common Stock 300,000 100,000 Retained Earnings 314,000 90.000 Sales 200.000 100.000 Income from Subsidiary 20.000 $1.299,000 $1.299.000 $465.000 $465.000