Pecos Athletics and its subsidiary, Stetson Footwear, engage in intercompany transactions as follows:

Pecos sells merchandise to Stetson at a markup of 35% on cost. In 2018, Pecos sold merchandise to Stetson, charging a total of $16,875,000. Although Stetson did not have any merchandise purchased from Pecos in its beginning inventory, it still held $175,500 of this merchandise in its ending inventory. In 2019, Pecos sold another $12,825,000 in merchandise to Stetson. Stetson held $148,500 of this merchandise in its ending inventory.

At the beginning of 2018, Stetson sold machinery with an original cost of $900,000 and accumulated depreciation of $340,000 to Pecos for $700,000. The machinery had a 7-year remaining life.

REQUIRED:

A. Determine the amounts that would be included in the following account balances reported in the end of year trial balances of the separate companies for 2019 related only to the transactions above. Enter your answers in the space provided. Enter credit amounts in parentheses. If no amount would be included related to these transactions, leave the space blank.

B. Determine the amounts that would be included in the 2019 consolidated end of year balances related to these transactions. Enter your answers in the space provided. If no amount would be included related to these transactions, leave the space blank.

C. Provide the eliminating entries necessary to convert the separate company balances to consolidated balances for these transactions.

	PECOS	STETSON	CONSOLIDATED
Sales
Cost of goods sold
Depreciation expense
Inventory
Machinery
Accumulated depreciation, machinery