On January 1, 2018, Paul Company purchased 80% of the common stock of Smith Company for $300,000. On this date Smith had total owners' equity of $350,000. Any excess of cost over book value is attributed to a patent, to be amortized over 10 years.

During 2018, Paul has accounted for its investment in Smith using the simple equity method.

During 2018, Paul sold merchandise to Smith for $50,000, of which $10,000 is held by Smith on December 31, 2018. Paul's gross profit on sales is 40%.

During 2018, Smith sold some land to Paul at a gain of $10,000. Paul still holds the land at year end.

Paul and Smith qualify as an affiliated group for tax purposes and thus will file a consolidated tax return. Assume a 30% corporate income tax rate.

	Trial Balance
	Parent	Sub.
Account Titles	Company	Company
Inventory, December 31	100,000	50,000
Other Current Assets	168,000	250,000
Invest in Smith Company	348,000
Land	240,000	100,000
Buildings and Equipment	300,000	200,000
Accumulated Depreciation	(80,000)	(60,000)
Current Liabilities	(150,000)	(30,000)
Long-Term Liabilities	(200,000)	(100,000)
Common Stock P Co.	(100,000)
Other Paid-in Capital P Co.	(180,000)
Retained Earnings P Co.	(320,000)
Common Stock S Co.		(100,000)
Other Paid-in Capital S Co.		(100,000)
Retained Earnings S Co.		(150,000)
Net Sales	(500,000)	(300,000)
Cost of Goods Sold	300,000	160,000
Operating Expenses	100,000	80,000
Subsidiary Income	(56,000)
Gain on Sale of Land		(10,000)
Dividends Declared P Co.	30,000
Dividends Declared S Co.		10,000

Required:

Prepare the elimination entries in journal form.