Pirate Transport Bought 80% of the Outstanding Voting Stock of Seaways

Essay

Pirate Transport bought 80% of the outstanding voting stock of Seaways Shipping at book value several years ago.(At the time of purchase,the fair value and book value of Seaways' net assets were equal. )Pirate sells merchandise to Seaways at 120% above Pirate's cost.Intercompany sales from Pirate to Seaways for 2012 were $450,000.Unrealized profits in Seaways' December 31,2011 inventory and December 31,2012 inventory were $17,000 and $15,000,respectively.Seaways reported net income of $750,000 for 2012.
Required:
1.Determine Pirate's income from Seaways for 2012.
2.In General Journal format,prepare consolidation working paper entries at December 31,2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.