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Pinta Company owns 90% of the common stock of Simplex Company. Simplex Company sells merchandise to Pinta Company at 25% above cost. During 2019 and 2020 such sales amounted to $700,000 and $1,100,000, respectively. At the end of each year, Pinta Company had in its inventory one-fourth of the amount of goods purchased from Simplex Company during that year.
Required:
Problem 1: Prepare, in general journal form, all entries necessary on the 12/31/2020 consolidated statements workpaper to eliminate the effects of intercompany sales.
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