Sale of Inventory to Subsidiary
Nordway Corporation acquired 90 percent of Olman Company’s voting shares of stock in 20X1. During 20X4, Nordway purchased 40,000 Playday doghouses for $24 each and sold 25,000 of the doghouses to Olman for $30 each. Olman sold 18,000 of the doghouses to retail establishments prior to December 31, 20X4, for $45 each. Both companies use perpetual inventory systems.
Required
a. Give all journal entries Nordway recorded for the purchase of inventory and resale to Olman Company in 20X4.
b. Give the journal entries Olman recorded for the purchase of inventory and resale to retail establishments in 20X4.
c. Give the worksheet eliminating entry(ies) needed in preparing consolidated financial statements for 20X4 to remove the effects of the intercompany sale.
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