During 2022, The Kasziba Company sold inventory costing it $100,000 to its 100% owned subsidiary, Sam Company. Kasziba marked up the inventory so that it achieved 50% gross profits on sales. By the end of the year (12/31/2022), Sam Company had sold 80% of the inventory to an outside, independent company for $230,000.

Required A:

1. By how much is inventory overstated on Sam Companys books, before the elimination entry on December 31, 2022?

2. Prepare the elimination entry needed to eliminate the gross profit that should not be recognized in the consolidated financial statements of December 31, 2022.

Required B:

1. Now assume in the next year, 2023, Sam Company sells the remaining inventory to outsiders for $70,000. Prepare the elimination entry for December 31, 2023.