Reference no: EM132773436

Problem - Pesto Company consolidates its subsidiary, Salsa. Information on intercompany transactions for 2020 is as follows:

1. During 2017, Salsa sold Pesto land for $600. The land had originally cost Salsa $200. The land is still held by Pesto at the end of 2020.

2. In 2020, Salsa sells merchandise to Pesto on a regular basis, at a markup of 20% over cost. In 2020, Salsa sold merchandise to Pesto at a price of $25,000. Pesto's beginning inventory for 2020 contained $1,320 in merchandise purchased from Salsa; Pesto's ending inventory contains $1,500 in merchandise purchased from Salsa.

3. At the beginning of 2018, Pesto sold Salsa equipment for $40,000. The equipment had been carried on Pesto's books at a cost of $50,000 and accumulated depreciation of $35,000. As of the date of sale, the equipment had a 10-year remaining life, straight-line. Salsa still holds the equipment at the end of 2020.

Required - Prepare the eliminating entries to get the intercompany transactions from the books?