Chapter 4 Homework on IS, IA, EI, BI, F1, F2 entries (7 points)

P owns 90% of S. During 2021 the companies had the following transactions:

- Sales of Inventory: Company Ps 2021 beginning inventory includes $50,000 of goods purchased from S in 2020. During 2021, S purchased goods from outsiders for $80,000 and resold these goods to P for $100,000. At the end of 2021, P also had $20,000 of the intercompany purchases in its 2021 ending inventory. The gross profit rate (gross profit margin) on the internal sale was 20%. Company P had not paid $15,000 of the invoices received from S for the goods (P owes S $15,000 for intercompany goods at year end of 2021). Assume a perpetual inventory system is used.

- Sales of depreciable assets: on 1/1/2021 P sold S a machine for $100,000. The machine has original cost of $150,000 and accumulated depreciation on 1/1/2021: $80,000. Assume that the buyer (S) estimates the remaining useful life of the machine = 5 years using a straight-line depreciation method, no residual value.

- Required: prepare elimination entries (IS, IA, EI, BI, F1, and F2) for the consolidated worksheets of 2021?

Further assume that at the end of 2022 (next year), the depreciable asset purchased in 2021 from P is still on the book of S. Prepare the F1 and F2 entries for the consolidated statement of 2022?

You can use the following schedule to compute values for EI and BI entries.