PART I: INTRA-ENTITY INVENTORY TRANSFER (15 points) Pit Corporation owns 60% of Stop Company's outstanding common stock. On 08/28/20, Pit sold inventory to Stop in exchange for $525,000 cash. Pit had purchased the inventory on 05/02/20 at a cost of $393,750. On 12/20/20, Stop sold 80% of the inventory to 3rd parties at a cash price of $560,000. The other 20% of the inventory remains on hand at 12/31/20. IN ORDER TO EARN FULL CREDIT, BE SURE TO CLEARLY SHOW ALL YOUR WORK. Requirement 1: Prepare the journal entries that would be recorded on Pit's and Stop's books during 2020. (5 POINTS) Requirement 2: Prepare the 12/31/20 consolidation worksheet entry related to these transactions. Feel free to use the templates provided below. (10 POINTS) ADJUSTMENT WE HAVE: Combined G/L Bals WE NEED Consolidated Amounts Account P's G/L S's G/L WHICH LEADS TO....... WE HAVE: Combined G/L Bals Consolidation Entries debit credit WE NEED Consolidated Amounts Account P's G/L S's G/L CALCULATIONS: PART II: INTRA-ENTITY DEPRCIABLE ASSET TRANSFER (15 points) Pit Corporation owns 60% of Stop Company's outstanding common stock. On 01/01/20, Pit sold a used piece of equipment to Stop in exchange for $190,000 cash. Pit's original cost of the equipment was $840,000 and accumulated depreciation at 01/01/20 was $610,000. The remaining useful life of the equipment is 10 years, and Stop will use that same useful life. Both companies use the straight-line method of depreciation. IN ORDER TO EARN FULL CREDIT, BE SURE TO CLEARLY SHOW ALL YOUR WORK. Requirement 1: Prepare the journal entries that would be recorded on Pit's and Stop's books during 2020. (5 POINTS) Requirement 2: Prepare the 12/31/20 consolidation worksheet entry related to these transactions. Feel free to use the templates provided below. (10 POINTS) ADJUSTMENT WE HAVE: Combined G/L Bals WE NEED: Consolidated Amounts Account P's G/L S's G/L WHICH LEADS TO....... WE HAVE: Combined G/L Bals Consolidation Entries debit credit WE NEED: Consolidated Amounts Account P's G/L S's G/L CALCULATIONS: PART I: INTRA-ENTITY INVENTORY TRANSFER (15 points) Pit Corporation owns 60% of Stop Company's outstanding common stock. On 08/28/20, Pit sold inventory to Stop in exchange for $525,000 cash. Pit had purchased the inventory on 05/02/20 at a cost of $393,750. On 12/20/20, Stop sold 80% of the inventory to 3rd parties at a cash price of $560,000. The other 20% of the inventory remains on hand at 12/31/20. IN ORDER TO EARN FULL CREDIT, BE SURE TO CLEARLY SHOW ALL YOUR WORK. Requirement 1: Prepare the journal entries that would be recorded on Pit's and Stop's books during 2020. (5 POINTS) Requirement 2: Prepare the 12/31/20 consolidation worksheet entry related to these transactions. Feel free to use the templates provided below. (10 POINTS) ADJUSTMENT WE HAVE: Combined G/L Bals WE NEED Consolidated Amounts Account P's G/L S's G/L WHICH LEADS TO....... WE HAVE: Combined G/L Bals Consolidation Entries debit credit WE NEED Consolidated Amounts Account P's G/L S's G/L CALCULATIONS: PART II: INTRA-ENTITY DEPRCIABLE ASSET TRANSFER (15 points) Pit Corporation owns 60% of Stop Company's outstanding common stock. On 01/01/20, Pit sold a used piece of equipment to Stop in exchange for $190,000 cash. Pit's original cost of the equipment was $840,000 and accumulated depreciation at 01/01/20 was $610,000. The remaining useful life of the equipment is 10 years, and Stop will use that same useful life. Both companies use the straight-line method of depreciation. IN ORDER TO EARN FULL CREDIT, BE SURE TO CLEARLY SHOW ALL YOUR WORK. Requirement 1: Prepare the journal entries that would be recorded on Pit's and Stop's books during 2020. (5 POINTS) Requirement 2: Prepare the 12/31/20 consolidation worksheet entry related to these transactions. Feel free to use the templates provided below. (10 POINTS) ADJUSTMENT WE HAVE: Combined G/L Bals WE NEED: Consolidated Amounts Account P's G/L S's G/L WHICH LEADS TO....... WE HAVE: Combined G/L Bals Consolidation Entries debit credit WE NEED: Consolidated Amounts Account P's G/L S's G/L CALCULATIONS