) Peng Corporation sells merchandise to its 60%-owned subsidiary, Skyline Company, at a 30% markup on cost. During 2017, sales from Peng to Skyline were $282,100. Included in Skylines December 31, 2017, inventories were goods acquired from Peng at a billed price of $49,400 and included in Skylines January 1, 2017, inventories were goods acquired from Peng at a billed price of $39,000.

Skyline sells merchandise to Peng at a markup of 35% on selling price. During 2017, sales from Skyline to Peng were $247,000. Included in Pengs December 31, 2017, inventories were goods acquired from Skyline at a billed price of $37,700 and included in Pengs January 1, 2017, inventories were goods acquired from Skyline at a billed price of $26,000. Merchandise acquired from affiliate is then sold to outside customers.

Prepare the working paper eliminating entry (in journal entry format) for the intercompany sale of merchandise for Peng Corporation and subsidiary for the year ended December 31, 2017. At what total amount should the intercompany merchandise be reported on the December 31, 2017 consolidated balance sheet? How (increase or decrease and the amount) is Pengs 2017 equity in income of Skyline affected by these transactions?