Proud Company and Slinky Company both produce and purchase equipment for resale each period and frequently sell to each other. Since Proud Company holds 60 percent ownership of Slinky Company, the controller of Proud compiled the following information with regard to intercompany transactions between the two companies in 20X5 and 20X6:

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a. Give the eliminating entries required at December 31, 20X6, to eliminate the effects of the inventory transfers in preparing a full set of consolidated financial statements.

b. Compute the amount of cost of goods to be reported in the consolidated income statement for 20X6.

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Percent Resold to Nonaffiliate in Cost to Sale Price to Year Produced by Sold to 20X5 20X6 Produce Affiliate 20X5 Proud Company Slinky Company 60 40 $100,000 $150,000 20X5 Slinky Company Proud Company 30 50 70,000 100,000 20X6 Proud Company Slinky Company 90 40,000 60,000 20X6 Slinky Company Proud Company 25 200,000 240,000