Problem 2

Sunshine Company, an 75 percent-owned subsidiary, sold inventory for $100,000 to its parent, Plastic Company, during 2017.Sunshines Co.'s gross profit % is 25 %.By the end of 2017, Plastic Company had sold 50 percent of the inventory purchased from Sunshine Company to outside parties.Sunshine Co. reported net income of $300,000 for 2017; Plastic reported income from own operations of $500,000.Plastic also had 20,000 of beginning inventory in 2017 that was purchased from Sunshine Co. in 2016 at the same gross profit %.All of this inventory was sold in 2017; FIFO inventory was used.Differential amortization from the original purchase of Sunshine Co. is $5,000 in 2017 related to depreciable assets.

The first elimination entry before being adjusted for intercompany transactions is as follows:

Common Stock100,000

APIC400,000

Retained Earnings300,000

Income form Sub225,000

Income to NCI75,000

Dividends Declared50,000

Investment in S C/S787,500

NCI262,500

Required

Give the consolidation entries needed in a three-part consolidation worksheet to eliminate the effects of the intercompany transfer of inventory in 2017.Also Include the entry above adjusted for intercompany transactions.