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1. Planet Corporation acquired 90 percent of Saturn Company’s voting shares of stock in 20X1. During 20X4, Planet purchased 44,000 Playday doghouses for $31 each and sold 29,000 of them to Saturn for $37 each. Saturn sold all of the doghouses to retail establishments prior to December 31, 20X4, for $52 each. Both companies use perpetual inventory systems.
 
Required:
a. Prepare the journal entries Planet recorded for the purchase of inventory and resale to Saturn Company in 20X4.

Record the sales of the Playday doghouses.  (29,000 x $37)

b. Prepare the journal entries Saturn recorded for the purchase of inventory and resale to retail establishments in 20X4.

2. Planet Corporation acquired 90 percent of Saturn Company’s voting shares of stock in 20X1. During 20X4, Planet purchased 57,000 Playday doghouses for $20 each and sold 42,000 of them to Saturn for $25 each. Saturn sold 35,000 of the doghouses to retail establishments prior to December 31, 20X4, for $40 each. Both companies use perpetual inventory systems.
 
Required:
a. Prepare all journal entries Planet recorded for the purchase of inventory and resale to Saturn Company in 20X4.

Record the purchase of inventory.  (57,000 x $20)

b. Prepare the journal entries Saturn recorded for the purchase of inventory and resale to retail establishments in 20X4.

 c. Prepare the worksheet consolidation entry(ies) needed in preparing consolidated financial statements for 20X4 to remove the effects of the intercompany sale.

3. Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various health stores during the year.
 
Required:
a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale of gnarl roots.

Record the purchase from the nonaffiliate.