Pale Company owns 90% of the outstanding common stock of Shale Company. On January 1,2017, Shale Company sold equipment to Pale Company for $300,000. Shale Company hadpurchased the equipment for $450,000 on January 1, 2006 and has been depreciating it over a 10year life by the straight-line method. The management of Pale Company estimated that theequipment had a remaining life of 5 years on January 1, 2017. In 2017, Pale Company reported$225,000 and Shale Company reported $150,000 in net income from their independentoperations.

Required:

a) Prepare in general journal form the workpaper entries relating to the intercompany sale ofequipment that are necessary in the December 31, 2017 and 2018 consolidated statementsworkpapers. Pale Company uses the cost method to record its investment in ShaleCompany.

b) Calculate equity in subsidiary income for 2017 and noncontrolling interest in net incomefor 2017