Question $6$: In consolidation of Perpetual Industries and Sand Hill Company at December $31,2023,$ you assemble the following data related to unconfirmed intercompany profits:

January $1,2023$ December $31,2023$

Land $$4,000,000$ $$4,000,000$

Merchandise inventory $2,400,0002,200,000$

Equipment $1,200,0001,050,000$

The equipment is carried on the purchasing affiliate$$s books at a cost of $$6,000,000$ and accumulated depreciation of $$1,800,000($straight$-$line, no salvage value$)$ at December $31,2023.$ Accumulated depreciation at the date of intercompany sale was $$1,000,000$; the original intercompany gain was $$1,500,000.$ Intercompany merchandise sales for $2023$ between Perpetual and Sand Hill were $$40,000,000.$

Required

a$.$ Assume that all of the above unconfirmed intercompany profits arose from upstream sales. Prepare the eliminating entries related to these intercompany transactions when consolidating the financial statements of Perpetual Industries and Sand Hill Company at December $31,2023.$

Enter answers using all zeros $($do not abbreviate answers to millions or thousands$).$

Description Debit Credit

Answer $1$

Answer $2$

$0$

Answer $3$

$0$

Answer $4$

Answer $5$

$0$

Answer $6$

$0$

To eliminate intercompany profit from sale of land.

Answer $7$

Answer $8$

$0$

Answer $9$

$0$

Answer $10$

Answer $11$

$0$

Answer $12$

$0$

To eliminate intercompany profit in beginning inventory.

Answer $13$

Answer $14$

$0$

Answer $15$

$0$

Answer $16$

Answer $17$

$0$

Answer $18$

$0$

To eliminate intercompany sales and purchases.

Answer $19$

Answer $20$

$0$

Answer $21$

$0$

Answer $22$

Answer $23$

$0$

Answer $24$

$0$

To eliminate intercompany profit in ending inventory.

Answer $25$

Answer $26$

$0$

Answer $27$

$0$

Accumulated depreciation Answer $28$

$0$

Answer $29$

$0$

Answer $30$

Answer $31$

$0$

Answer $32$

$0$

To eliminate unconfirmed gain on intercompany transfer of equipment.

Answer $33$

Answer $34$

$0$

Answer $35$

$0$

Answer $36$

Answer $37$

$0$

Answer $38$

$0$

To eliminate excess depreciation expense.

Answer $39$

Answer $40$

$0$

Answer $41$

$0$

Answer $42$

Answer $43$

$0$

Answer $44$

$0$

To restate the asset and accumulated depreciation accounts.

b$.$ Repeat part a assuming that all of the above unconfirmed intercompany profits arose from downstream sales.

Enter answers using all zeros $($do not abbreviate answers to millions or thousands$).$

Description Debit Credit

Answer $45$

Answer $46$

$0$

Answer $47$

$0$

Answer $48$

Answer $49$

$0$

Answer $50$

$0$

To eliminate intercompany profit from sale of land.

Answer $51$

Answer $52$

$0$

Answer $53$

$0$

Answer $54$

Answer $55$

$0$

Answer $56$

$0$

To eliminate intercompany profit in beginning inventory.

Answer $57$

Answer $58$

$0$

Answer $59$

$0$

Answer $60$

Answer $61$

$0$

Answer $62$

$0$

To eliminate intercompany sales and purchases.

Answer $63$

Answer $64$

$0$

Answer $65$

$0$

Answer $66$

Answer $67$

$0$

Answer $68$

$0$

To eliminate intercompany profit in ending inventory.

Answer $69$

Answer $70$

$0$

Answer $71$

$0$

Accumulated depreciation Answer $72$

$0$

Answer $73$

$0$

Answer $74$

Answer $75$

$0$

Answer $76$

$0$

To eliminate unconfirmed gain on intercompany transfer of equipment.

Answer $77$

Answer $78$

$0$

Answer $79$

$0$

Answer $80$

Answer $81$

$0$

Answer $82$

$0$

TTo eliminate excess depreciation expense.

Answer $83$

Answer $84$

$0$

Answer $85$

$0$

Answer $86$

Answer $87$

$0$

Answer $88$

$0$

To restate the asset and accumulated depreciation accounts.

cost $$55,000.$ Pohang continues to hold the land.

$2.$ During $2023,$ Pohang recorded intercompany merchandise sales of $$300,000$ to Suro, reflecting a markup of $25$ percent on cost$.$ Suro$$s beginning inventory included $$10,000$ of merchandise purchased from Pohang. Suro$$s ending inventory included $$15,000$ of merchandise purchased from Pohang.

$3.$ On January $1,2023,$ Suro sold machinery to Pohang for $$25,000$ and recorded a gain of $$5,000.$ The machinery is being depreciated over its remaining life of five years, straight$-$line.

$4.$ Pohang billed Suro $$20,000$ for services during $2023.$ Costs incurred in supplying these services amounted to $$16,000.$ On December $31,2023,$ the unpaid portion of these intercompany services amounted to $$1,000.$

Required

a$.$ Prepare a schedule to compute Pohang$$s equity in net income of Suro for $2023.$

Use negative signs with answers that reduce the net income amount.

Suro$$s net income Answer $1$

Intercompany profits in Suro$$s beginning inventory Answer $2$

Intercompany profits in Suro$$s ending inventory Answer $3$

Unconfirmed gain on intercompany sale of machinery Answer $4$

Equity in net income Answer $5$

b$.$ Prepare the working paper eliminations to consolidate the accounts of