The accountant told me that she had eliminated transactions incurred between the companies Sunshine Ltd and Valley Ltd. The sales are legitimate, we have exchanged invoices and contracts, so can you explain why we need to eliminate the inter-company transactions? I have extracted two examples below. Can you please examine the following journal entries for errors. If incorrect, explain why and provide me with the corrected journal entries.

1) Last year on 1 March 2020, Sunshine Ltd sold an item of machinery for $260,000 to Valley Ltd. At the date of sale, Sunshine Ltd had recorded the asset at a carrying amount of $135,000 (cost was $150,000 depreciated at 10% for one year). Is it correct to debit Gain on Sale of Machinery for $125,000 and credit Machinery for $125,000 on 30 June 2021? Do we need to do anything else?

2) On 1 June 2021, Valley Ltd sold inventory to Sunshine Ltd for $15,000, recording a before-tax profit of $3,000. On the 30 June 2021, Sunshine Ltd has sold one-third of the inventory to other entities for $6,000 but still holds two-third of these inventories as of 30 June 2021. Can we debit Sales for $15,000, credit Cost of Sales for $15,000 on 30 June 2021? Do we need to do anything else?