On January 1, 2013, Pilsner Company Acquired an 80% Interest

Essay

On January 1, 2013, 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: $\begin{array}{lll}&\text { Book Value }&\text { Fair Value }\\\text { Inventory } & \$ 50,000 & \$ 85,000 \\\text { Equipment (net) } & 540,000 & 720,000 \\\text { Land } & 300,000 & 660,000\end{array}$
The equipment had an estimated remaining useful life of 8 years.One-half of the inventory was sold in 2013 and the remaining half was sold in 2014.Smalley Company reported net income of $240,000 in 2013 and $300,000 in 2014.No dividends were declared or paid in either year.Pilsner Company uses the cost method to record its investment in Smalley Company.
Required:
Prepare, in general journal form, the workpaper eliminating entries necessary in the consolidated statements workpaper for the year ending December 31, 2014.