Powell Company owns 80% of the outstanding common stock of Sullivan Company. On June 30, 2014, Sullivan Company sold equipment to Powell Company for $549,200. The equipment cost Sullivan Company $766,400 and had accumulated depreciation of $409,600 on the date of the sale. The management of Powell Company estimated that the equipment had a remaining useful life of four years from June 30, 2014. In 2015, Powell Company reported $285,800 and Sullivan Company reported $187,600 in net income from their independent operations (including sales to affiliates but excluding dividend or equity income from subsidiary).

(a)

Prepare in general journal form the workpaper entries necessary because of the intercompany sale of equipment in:

(1)The consolidated financial statements workpaper for the year ended December 31, 2014.