1) Puma Company owns 80% of the common stock of Smarte Company. Puma sells merchandise to Smarte at 20% above cost. During 2017 and 2018, intercompany sales amounted to $1,080,000 and $1,200,000 respectively. At the end of 2017, Smarte had one-fifth of the goods purchased that year from Puma in its ending inventory. Smartes 2018 ending inventory contained one-fourth of that years purchases from Puma. There were no intercompany sales prior to 2017.

Required:

A. Prepare in general journal form all entries necessary on the consolidated statements workpapers to eliminate the effects of the intercompany sales for both 2017 and 2018.