P Company acquired 75 percent of S Company's stock at the underlying book value on January 1, 20X8. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of S Company. S Company reported shares outstanding of $350,000 and retained earnings of $100,000. During 20X8, S Company reported net income of $60,000 and paid dividends of $3,000. In 20X9, S Company reported net income of $90,000 and paid dividends of $15,000. The following transactions occurred between P Company and S Company in 20X8 and 20X9: S Co. sold equipment to P Co. for a $42,000 gain on December 31, 20X8. S Co. had originally purchased the equipment for $140,000 and it had a carrying value of $28,000 on December 31, 20X8. At the time of the purchase, P Co. estimated that the equipment still had a seven-year remaining useful life.

P Co. sold land costing $90,000 to S Co. on June 28, 20X9, for $110,000.

On January 1, 20X9, P Company sold S Co. equipment it had purchased for $72,000 on January 1, 20X4. The equipment had a 12-year economic life and was sold to S for $80,000. Both companies use straight-line depreciation. The new estimated economic life is 8 years.

Required:

make all the journal entries necessary to record any intercompany transactions during 20X8 and all transactions for 20X9. Assume that P Co. uses the fully adjusted equity method to account for its investment in S Company.