Psalm Enterprises Owns 90% of the Outstanding Voting Stock of Solomon

question 34

Essay

Psalm Enterprises owns 90% of the outstanding voting stock of Solomon Siding,which was purchased at a cost equal to 90% of the book value of Solomon's net assets many years ago.(At the time of purchase,the fair value and book value of Solomon's net assets were equal.)Psalm purchases merchandise from Solomon at 110% above Solomon's cost.In 2014,intercompany sales from Solomon to Psalm amounted to $362,000.Unrealized profits in Psalm's December 31,2013 inventory and December 31,2014 inventory were $82,000 and $26,000,respectively.Solomon reported net income of $980,000 for 2014.
Required:
1.Determine Psalm's income from Solomon for 2014.
2.In General Journal format,prepare consolidation working paper entries at December 31,2014 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.

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Definitions:

Geographic Movement

Refers to the migration or movement of people, goods, and ideas across different geographic locations.

Revolutionary War

The conflict between the Thirteen American colonies and British government that led to the independence of the United States, occurring from 1775 to 1783.

Concrete Step

A specific, actionable measure taken to achieve a particular goal or to implement a plan.

Financial Compensation

Payment provided to someone in exchange for an injury, loss, or the performance of a service or job.