Reference no: EM132622549

Panda Corporation has an 80% ownership stake in Smile Inc. when the book values were equal to the fair values. Separate income statements of Panda Corporation and its subsidiary, Smile Inc., for 2019 were as follows:

	Panda	Smile
Sales Revenue	$2,200,000	$1,000,000
Cost of sales	1,400,000	600,000
Other expenses	400,000	200,000
Gain on sale- equipment	100,000
Income from Smile		131,000
Net income	$631,000	$200,000

Additional information:

• Panda had sold inventory that cost $160,000 to Smile for $300,000 in 2018, 50% of that inventory remained unsold at year-end. Panda had sold inventory that cost $140,000 to Smile for $200,000 in 2019, 40% of that inventory remained unsold at year-end. The 2018 ending inventory is sold in 2019.
• Panda sold equipment with a book value of $120,000 and a 4-year remaining useful life to Smile for $220,000 on January 2, 2019. The equipment has no salvage value. The straight-line depreciation method is used.
• Smile did not declare or pay dividends in 2018 and 2019.

Required:

Question 1. Prepare adjusting/eliminating entries for the consolidation worksheet at December 31, 2019.