On January 1, 2011 Company X acquired 80% of the common stock of Company Y for $200,000. On this date, Company Y had total owners' equity of $200,000 (including retained earnings of $ 100,000). During 2011 and 2012, Company X appropriately accounted for its investment in Company Y using the simple equity method.

Any excess of cost over book value is attributable to investment (worth $12,500 more than cost), to equipment (worth $25,000 more than book value), and to goodwill. FIFO is used for inventories. The equipment has a remaining life of four years, and straight-line depreciation is used. On January 1, 2012, Company X held merchandise acquired from Company Y for $20,000. During 2012, Company Y sold merchandise to company X for $40,000, $10,000 of which was still held by Company X on December 31, 2012. Company Y usual gross profit is 50%.

On January 1, 2011, Company X sold equipment to Company Y at a gain of $15,000. Depreciation is being computed using the straight -line method, a 5-year life, and no salvage value.

The following trial balances were prepared for Company X and Company Y for December 31, 2012:
	Company X	Company Y
Inventory, December 31 .........................................................................................................................................	130,000	50,000
Other Current Assets ...............................................................................................................................................	241,000	235,000
Investment in Company Y ........................................................................................................................................	308,000
Other Long Term Investments .................................................................................................................................	20,000
Land ..........................................................................................................................................................................	140,000	80,000
Buildings and Equipment ..........................................................................................................................................	375,000	200,000
Accumulated Depreciation .......................................................................................................................................	(120,000)	(30,000)
Other Intangible Assets ............................................................................................................................................		20,000
Current Liabilities .....................................................................................................................................................	(150,000)	(70,000)
Bonds Payable ..........................................................................................................................................................		(100,000)
Other Long Term Liabilities ......................................................................................................................................	(200,000)	(50,000)
Common Stock .........................................................................................................................................................	(200,000)	(50,000)
Paid-In Capital in Excess of Par .................................................................................................................................	(100,000)	(50,000)
Retained Earnings, January 1, 2012 .........................................................................................................................	(320,000)	(150,000)
Sales ..........................................................................................................................................................................	(600,000)	(315,000)
Cost of Goods Sold ...................................................................................................................................................	350,000	150,000
Operating Expenses ..................................................................................................................................................	150,000	60,000
Subsidiary Income ....................................................................................................................................................	(84,000)

Dividends Declared .............................................................................................................................................................	60,000		20,000
Totals ..................................................................................................................................................................................	0		0
Prepare the necessary elimination and adjusting entries.