A parent and its subsidiary began engaging in intercompany merchandise sales this year. Total retail value of upstream sales for the year were $65,000; the retail value of downstream sales was $25,000. The subsidiary sells to the parent at a markup of 35% on cost; the parent sells to the subsidiary at a markup of 30% on sales price. Upstream sales of $13,500 remain in the parents ending inventory. Downstream sales of $6,000 remain in the subsidiarys ending inventory.

Required

a. Calculate the unconfirmed profit in the parents ending inventory and in the subsidiarys ending inventory.

b. Prepare the working paper eliminating entries (I) for the intercompany inventory transactions, required to consolidate the trial balances of the parent and its subsidiary for the year.