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Separate and Consolidated Balances, Intercompany Merchandise and Depreciable Asset Transactions Peco Athletics and its subsidiary, Stetson Footwear, engage in the following intercom- pany transactions

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Separate and Consolidated Balances, Intercompany Merchandise and Depreciable Asset Transactions Peco Athletics and its subsidiary, Stetson Footwear, engage in the following intercom- pany transactions in 2022 and 2023. Peco sells merchandise to Stetson at a markup of 35 percent on cost. In 2022, Peco sold merchandise to Stetson, charging a total of $19,980,000. Stetson had $168,750 in merchandise purchased from Peco in its beginning inventory, and had $189,000 in merchandise purchased from Peco in its ending inventory. In 2023, Peco sold another $22,680,000 in merchandise to Stetson. Stetson had $216,000 of this merchandise in its ending inventory. At the beginning of 2022, Stetson sold machinery with an original cost of $1,000,000 and accumulated depreciation of $450,000 to Peco for $750,000. The machinery had a 5-year remaining life, straight- line. Peco still holds the machinery at the end of 2023. Required a. For each of the items above, for each of the years 2022 and 2023, determine the accounts and bal- ances reported in the year-end trial balances of the separate companies, the balances that should be reported in the consolidated accounts, and the eliminating entries necessary to convert the separate account balances to the consolidated balances. b. Now assume Peco sold the machinery to an outside party for $500,000 halfway through 2024. De- termine the balances reported in the year-end trial balances of the separate companies, the balances that should be reported in the consolidated accounts, and the eliminating entries necessary to convert the separate account balances to the consolidated balances.

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