Pirate Company purchased 60 percent ownership of Ship Corporation on January 1, 20X1, for $82,800. On that date, the noncontrolling interest had a fair value of $55,200 and Ship reported common stock outstanding of $100,000 and retained earnings of $20,000. The full amount of the differential is assigned to land to be used as a future building site. Pirate uses the fully adjusted equity method in accounting for its ownership of Ship. On December 31, 20X2, the trial balances of the two companies are as follows:

	Pirate Company			Ship Corporation
Item	Debit	Credit		Debit	Credit
Cash and Accounts Receivable	$ 69,400			$ 51,200
Inventory	60,000			55,000
Land	40,000			30,000
Buildings & Equipment	520,000			350,000
Investment in Ship Corporation	103,780
Cost of Goods Sold	99,800			61,000
Depreciation Expense	25,000			15,000
Interest Expense	6,000			14,000
Dividends Declared	40,000			10,000
Accumulated Depreciation		$175,000			$ 75,000
Accounts Payable		68,800			41,200
Bonds Payable		80,000			200,000
Bond Premium		1,200
Common Stock		200,000			100,000
Retained Earnings		227,960			50,000
Sales		200,000			120,000
Income from Ship Corporation		11,020
	$963,980	$963,980		$586,200	$586,200

Page 289Ship sold inventory costing $25,500 to Pirate for $42,500 in 20X1. Pirate resold 80 percent of the purchase in 20X1 and the remainder in 20X2. Ship sold inventory costing $21,000 to Pirate in 20X2 for $35,000, and Pirate resold 70 percent of it prior to December 31, 20X2. In addition, Pirate sold inventory costing $14,000 to Ship for $28,000 in 20X2, and Ship resold all but $13,000 of its purchase prior to December 31, 20X2.

Assume both companies use straight-line depreciation and that no property, plant, and equipment has been purchased since the acquisition.

Use the data provided after the trial balance in the paragraph in the book. Complete the tables for each inventory transaction and the consolidation entries for the x7 and the x8 inventory transactions.