Parent Corporation paid $105,000 to acquire 75% of the common shares of Subsidiary Inc. on December 31, 2017. At that date, Parent Corporation also…

Parent Corporation paid $105,000 to acquire 75% of the common shares of Subsidiary Inc. on December 31, 2017. At that date, Parent Corporation also had an outstanding note payable to Subsidiary Inc. in the amount of $20,000.

Assume that Parent Corporation and Subsidiary Inc. had the following account balances at December 31, 2017 (immediately after the investment):

Assets:                                                                           Parent                       Subsidiary

                                                                                   Corporation                        Inc.

Cash                                                                             $ 35,000                       $ 15,000

Note receivable from Parent Corporation                                                  20,000

Inventory                                                                     120,000                          30,000

Investment in Subsidiary Inc.                              105,000

Other assets                                                               495,000                         65,000

Total                                                                            $755,000                      $130,000

Liabilities and shareholders’ equity:

Accounts payable                                                    $ 15,000                        $10,000

Note payable to Subsidiary Inc.                             20,000

Common shares                                                         500,000                           90,000

Retained earnings                                                     220,000                         30,000

Total                                                                            $755,000                      $130,000

Prepare the necessary eliminating journal entries that would appear on the December 31, 2014 worksheet for a consolidated balance sheet.

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