Pele Incorporated (Pele) is a client of Callahan and Lowe LP (C&L). During the year, Pele purchased Soccer Strategies Specialists, Inc., (SSS). Since this is the first time that Pele has completed a consolidation worksheet, Pele's controller has asked C&L to review the consolidation prepared for the year ended December 31, Year 2. An associate at C&L has performed an initial review of the consolidation worksheet and has drafted an email to the controller of Pele with comments and required changes. Your manager has asked you to review the email below and to make any revisions necessary to correct any errors.

To revise the email, click on each segment of underlined text below and select the needed correction, if any from the list provided. If the underlined text is already correct in the context of the document, select [Original text] from the list. If removal of the entire underlined text is the best revision to the email select [Delete] from the list.

From: bobb

To: bobbiee

Sent: January 23, Year 3 10:54 AM

RE: Consolidation Worksheet

Dear Controller,

We have reviewed the consolidation worksheet prepared for the year ended December 31, Year 2 and have the following comments and requested changes:

While the consolidated worksheet has correctly included the balances of both the parent, Pele Incorporated (Pele) and its wholly-owned subsidiary, Soccer Strategies Specialists Inc., (SSS), some of the consolidated balances require adjustment.

The consolidated balance for accounts receivable and accounts payable should be adjusted to a debit balance of $258,364 and a credit balance of $80,000 respectively.

Choose an option below:

[Original text] $258,364 and a credit balance of $80,000, respectively.

[Delete Text]

$258,364 and a debit balance of $80,000, respectively.

$12,000 and a debit balance of $12,000, respectively.

$261,364 and a credit balance of $83,000, respectively.

$15,000 and a debit balance of $15,000, respectively.

$237,000 and a credit balance of $75,000, respectively.

The purchase of the 25,000 stock of SSS on June 30, Year 2 had the potential to create goodwill.The goodwill elimination entry is correct.

[Original text] The goodwill elimination entry is correct.

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However, the company purchased the stock of SSS for fair value, therefore no goodwill should be recorded.

The goodwill elimination entry is not correct; the consolidated balance for goodwill should be $223,513.

The goodwill elimination entry is not correct; the consolidated balance for goodwill should be $131,000.

The goodwill elimination entry is not correct; the consolidated balance for goodwill should be $39,891.

The goodwill elimination entry is not correct; the consolidated balance for goodwill should be $239,861.

The balance for PP&E is incorrect.The correct balance should be $2,850,000.

[Original text] The correct balance should be $2,850,000.

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The correct balance should be $4,050,000

The correct balance should be $2,250,000

The correct balance should be $3,381,345

The correct balance should be $3,250,345

Pele and SSS had an intercompany inventory transaction. Because of this transaction, several accounts require review to determine if the proper consolidated balances are presented correctly.

The consolidated ending balance for sales revenue is correct.

[Original text] The consolidated ending balance for sales revenue is correct.

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The consolidated ending balance for sales revenue is not correct. The correct balance should be $10,800 cr.

The consolidated ending balance for sales revenue is not correct. The correct balance should be $2,000 dr.

The consolidated ending balance for sales revenue is not correct. The correct balance should be $2,000 cr.

The consolidated ending balance for sales revenue is not correct. The correct balance should be $2,500 dr.

The consolidated ending balance for sales revenue is not correct. The correct balance should be $10,800 dr.

The consolidated ending balance for sales revenue is not correct. The correct balance should be $15,800 cr.

The eliminating entry for cost of revenues is correct, however there is no elimination of the profit in ending inventory. The eliminating entry should include a debit to inventory for $13,300.

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[Original text] The eliminating entry for cost of revenues is correct, however there is no elimination of the profit in ending inventory. The eliminating entry should include a debit to inventory for $13,300.

[Delete Text]

The eliminating entry for cost of revenues and inventory is incorrect. The correct entry should credit cost of revenues for $12,170 and credit inventory for $1,130.

The eliminating entry for cost of revenues and inventory is incorrect. The correct entry should debit cost of revenues for $12,170 and credit inventory for $12,170.

The eliminating entry for cost of revenues and inventory is incorrect. The correct entry should debit cost of revenues for $11,970 and credit inventory for $1,800.

The eliminating entry for cost of revenues and inventory is incorrect. The correct entry should credit cost of revenues for $2,000 and credit inventory for $1,330.

The eliminating entry for cost of revenues is incorrect; the correct entry should be a credit of $11,970.

Once all the changes are made, adjustments to the eliminating entries to account for income taxes at the consolidated level are also required.

We did not find any other issues with the consolidation worksheet. However, please feel free to contact me if there are specific questions.

Regards,

Audit Manager

C&H LP.

Can you please help out with the bold sections