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PepsiCo, Inc. acquired 80% of its subsidiary on January 1, 2023. The following intercompany transactions occurred during the year: PepsiCo sold goods to the subsidiary

PepsiCo, Inc. acquired 80% of its subsidiary on January 1, 2023. The following intercompany transactions occurred during the year:

  • PepsiCo sold goods to the subsidiary for $100,000, with a cost of $70,000. Half of these goods remained in the subsidiary's inventory at year-end.
  • PepsiCo provided services to the subsidiary worth $50,000.
  • The subsidiary declared and paid dividends of $20,000.

Required:

  1. Prepare the necessary consolidation adjustments for the intercompany transactions.
  2. Prepare the consolidated financial statements for the year ending December 31, 2023.
  3. Discuss the challenges of preparing consolidated financial statements and the importance of eliminating intercompany transactions.

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