Part II. Intercompany Inventories

Prone Company acquired 90% of the outstanding common stock of Still Company on January 1, 2010. On the date of acquisition, all assets and liabilities had book values equal to their fair values, and there was no goodwill or bargain purchase implied by the acquisition of Still Company. Since acquiring, Prone has used the partial equity method to account of its investment.

Still Company sold merchandise to Prone company for $17,000 in 2015 and for $40,000 in 2016. Still sold this merchandise at a gross profate rate of 25%. Thirty percent of the 2016 sales remains in the inventory of Prone Company at December 31, 2016. On January 1, 2016, Prone Companys inventory contained goods purchased from Still in 2015 for $7,200 (sold at a gross profit rate of 25%). On December 31, 2016, Prone owes Still $4,000 on open account stemming from the merchandise purchases in 2016.

Required:

Prepare all necessary workpaper elimination entries related to the intercompany sales of merchandise to prepare consolidated financial statements for 2016

2016 workpaper elimination entries