I. Parent and its 60%, owned subsidiary, Sub, conducted the following transactions with each other:

Sale of inventory

During 2017, Sub sold $100,000 of merchandise (inventory) with an original cost of $80,000 to P. On 12/31/17, $20,000 of the inventory was still held by P.

During 2018, Sub sold $125,000 of merchandise (inventory) with an original cost of $100,000 to P. On 12/31/18, $40,000 of the inventory was still held by P.

During 2019, Sub sold $120,000 of merchandise (inventory) with an original cost of $90,000 to P. On 12/31/19, $30,000 of the inventory was still held by P.

On 12/31/19, P still owed Sub $60,000 for the above purchases.

Sale of nondepreciable property

On January 1, 2018, P had sold $15,000 of land to Sub for $22,000. Sub is still holding the land as of 12/31/19.

1. On 1/1/18, P sold its 70% owned subsidiary, Young, equipment for $36,000. The equipment had originally cost P $50,000 and had accumulated depreciation on the books of P of $48,000. The equipment is being depreciated using the straight line method over its remaining 6-year life. (There is no residual value.).

INSTRUCTIONS:

1. Prepare the elimination entries required for 2018 AND 2019.
2. Assuming that the net income of P and S, before any adjustments for intra-entity sales, was $900,000 and $500,000, respectively, determine the consolidated net income for P and its 60% subsidiary.