Tax Deferral on Gains and Losses
Springdale Corporation holds 75 percent of the voting shares of Holiday Services Company. During 20X7 Springdale sold inventory costing $60,000 to Holiday Services for $90,000, and Holiday Services resold one-third of the inventory in 20X7. Also in 20X7, Holiday Services sold land with a book value of $140,000 to Springdale for $240,000, and Springdale continues to hold the land. The companies file separate tax returns and are subject to a 40 percent tax rate.
Required
Give the eliminating entries relating to the intercorporate sale of inventories and land to be entered in the consolidation worksheet prepared at the end of 20X7.
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