Pirate Company purchased 60 percent ownership of ShipCorporation on January 1, 20X1, for $82,800. On that date, thenoncontrolling interest had a fair value of $55,200 and Shipreported common stock outstanding of $100,000 and retained earningsof $20,000. The full amount of the differential is assigned to landto be used as a future building site. Pirate uses the fullyadjusted equity method in accounting for its ownership of Ship. OnDecember 31, 20X2, the trial balances of the two companies are asfollows: Pirate Company Ship Corporation Item Debit Credit DebitCredit Cash and Accounts Receivable $ 69,400 $ 51,200 Inventory60,000 55,000 Land 40,000 30,000 Buildings & Equipment 520,000350,000 Investment in Ship Corporation 103,780 Cost of Goods Sold99,800 61,000 Depreciation Expense 25,000 15,000 Interest Expense6,000 14,000 Dividends Declared 40,000 10,000 AccumulatedDepreciation $175,000 $ 75,000 Accounts Payable 68,800 41,200 BondsPayable 80,000 200,000 Bond Premium 1,200 Common Stock 200,000100,000 Retained Earnings 227,960 50,000 Sales 200,000 120,000Income from Ship Corporation 11,020 $963,980 $963,980 $586,200$586,200 Page 289Ship sold inventory costing $25,500 to Pirate for$42,500 in 20X1. Pirate resold 80 percent of the purchase in 20X1and the remainder in 20X2. Ship sold inventory costing $21,000 toPirate in 20X2 for $35,000, and Pirate resold 70 percent of itprior to December 31, 20X2. In addition, Pirate sold inventorycosting $14,000 to Ship for $28,000 in 20X2, and Ship resold allbut $13,000 of its purchase prior to December 31, 20X2. Assume bothcompanies use straight-line depreciation and that no property,plant, and equipment has been purchased since the acquisition.Required Record the journal entry or entries for 20X2 on Pirate’sbooks related to its investment in Ship Corporation, using theequity method. Prepare the consolidation entries needed to completea consolidated worksheet for 20X2. Prepare a three-partconsolidation worksheet for 20X2.