(Module 1) Pedco Sold Inventory Costing $120,000 to Its 80%-Owned

Essay

(Module 1) Pedco sold inventory costing $120,000 to its 80%-owned subsidiary, Sedco, for $150,000 in 2006. Sedco resold most of this inventory for $210,000 in 2005. At 12/31/06, Sedco's balance sheet showed intercompany-acquired inventory on hand of $35,000. Sedco reported $500,000 of net income for 2006.
Required:
a. Prepare the general ledger entry required at the end of 2006 under the complete equity method.
b. Prepare the consolidation entry or entries required at 12/31/06.