Unrealized Profits in Prior Year
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. The remaining inventory was resold in 20X8. Also in 20X7, Holiday Services sold land with a book value of $140,000 to Springdale for $240,000. Springdale continues to hold the land at the end of 20X8. 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 needed in the consolidation worksheet at the end of 20X8. Assume that Springdale uses the basic equity method in accounting for its investment in Holiday Services.
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