Salt Is a Subsidiary of Pretzel Required
A

Salt is a subsidiary of Pretzel. Salt sells inventory to Pretzel at a markup of 20% on cost. In 2020, Salt sold inventory to Pretzel at a price of $30,000. Pretzel's ending inventory included $3,120 purchased from Salt. Pretzel sold inventory purchased from Salt to outside customers at a price of $40,000. The cost to Pretzel of the inventory sold was $28,800.
Pretzel provided services costing $10,000 to Salt, at a price of $15,000. Salt reports these services as operating expenses.
Below is an excerpt from the consolidation working paper at the end of 2020, relating to the above transactions.
$$\begin{array} { | l | c | r | r | } \hline & \begin{array} { c } \text { Pretzel's } \\\text { Books }\end{array} & \begin{array} { c } \text { Salt's } \\\text { Books }\end{array} & \begin{array} { c } \text { Consolidated } \\\text { Balances }\end{array} \\\hline \text { Inventory, end of year } & \$ 3,120 & \$ - - & \\\hline \text { Merchandise sales revenue } & 40,000 & 30,000 & \\\hline \text { Service revenue } & 15,000 & - - & \\\hline \text { Cost of goods sold } & 28,800 & 25,000 & \\\hline \text { Operating expenses } & 10,000 & 15,000 & \\\hline\end{array}$$ Required
a. Fill in the amounts that should appear in the consolidated balances column.
b. What was Pretzel's beginning balance of inventory purchased from Salt?
c. Prepare, in journal form, the consolidation eliminating entries that transform the balances reported in the separate accounts of Pretzel and Salt into the correct consolidated balances.