On January 1st 20X1, Pepper purchased 80% of Salt for $640K. At the time of the purchase the FMV equal Book Value. Salts balance in Common Stock at the time of the purchase was $200K. Salts net income at December 31, 20X1 was $100K. Included in net income was a $25K gain for inventory sold to Pepper during the year. Salt originally purchased the inventory for $75K Pepper still has one half of the inventory on hand at the end of year. Salt also paid a $10K dividend during the year.

a- Prepare the basic elimination entry required to prepare the Consolidated Financial Statements at December 31, 20X1

b- Prepare the intercompany elimination entry for the sale of the inventory at December 31, 20X1 (5pts)

c- Prepare the intercompany elimination entry for the sale of the remaining inventory at the end of the following year December 31,20X2 (5pts)