On January 1,2007,Jones Company Acquired 90 Percent of the Outstanding

On January 1,2007,Jones Company acquired 90 percent of the outstanding common stock of Smith Corporation for $1,242,000.On that date,the fair value of noncontrolling interest was equal to $138,000.The entire differential was related to land held by Smith.At the date of acquisition,Smith had common stock outstanding of $520,000,additional paid-in capital of $200,000,and retained earnings of $540,000.During 2007,Smith sold inventory to Jones for $440,000.The inventory originally cost Smith $360,000.By year-end,30 percent was still in Jones' ending inventory.During 2008,the remaining inventory was resold to an unrelated customer.Both Jones and Smith use perpetual inventory systems.
Income and dividend information for both Jones and Smith for 2007 and 2008 are as follows:
Required:
a.Present the workpaper elimination entries necessary to prepare consolidated financial statements for 2007 assuming Jones accounts for its investment in Smith stock using the fully adjusted equity method.
b.Present the workpaper elimination entries necessary to prepare consolidated financial statements for 2008,assuming Jones accounts for its investment in Smith stock using the cost method.