Reference no: EM133154209

Question - On January 1, 2028, Pilsner Company acquired an 80% interest in Smalley Company for $3,600,000. On that date, Smalley Company had retained earnings of $800,000 and common stock of $2,800,000. The book values of assets and liabilities were equal to fair values except for the following:

Book Value Fair Value

Inventory $40,000 $85,000

Equipment (net) 560,000 720,000

Land 300,000 660,000

The equipment had an estimated remaining useful life of 8 years. The inventory was sold in 2028. Smalley Company reported net income of $240,000 in 2028 and $300,000 in 2029. No dividends were declared or paid in either year. Pilsner Company uses the cost method to record its investment in Smalley.

Required - Prepare, in general journal form, the workpaper eliminating entries necessary in the consolidated statements workpaper for the year ending December 31, 2029.