Exam 9: Intercompany Inventory Transfers

In 2006, a home office shipped inventory costing $60,000 to its branch for $90,000. At the end of 2006, the branch reported $30,000 of this inventory in its balance sheet. The amount of unrealized intracompany profit at the end of 2006 is

_____ (Module 1) In 2006, Pundax sold inventory above cost to Sundax, its 100%-owned subsidiary. At 12/31/06, $4,000 of unrealized intercompany profit existed. Which of the following "postings" is made in consolidation at 12/31/06?

_____ (Module 1) Which of the following accounts is a balance sheet account?

_____ In early 2005, Pye sold inventory costing $33,000 to its 100%-owned subsidiary, Slyce, for $44,000. At 12/31/05, Slyce made a lower-of-cost-or-market adjustment of $6,000 for this inventory, all of which was still on hand. What amount is reported for this inventory in the 12/31/05 consolidated balance sheet?

The general ledger entry to adjust the Intracompany Profit Deferred account at the end of an accounting period

(Module 2) In 2005, Sondex, an 80%-owned subsidiary of Pondex, sold inventory to Pondex for $500,000, which includes a markup of 25% on Sondex's cost. At 12/31/05, Pondex reported $80,000 of this inventory in its balance sheet. (This inventory was resold in 2006 by Pondex.) In 2006, Sondex sold to Pondex for $800,000 inventory that cost $600,000, of which $640,000 was resold by 12/31/06. Sondex reported $750,000 of net income for 2006. Required: Prepare the consolidation entry or entries required at 12/31/06 under the partial equity method.

If an intercompany inventory transfer occurs in late 2005 and all this inventory is not resold to an outside, third party until 2006, the intercompany sale is eliminated in consolidation in 2005-not 2006.

_____ (Module 1) In 2006, Sundax (a 75% owned subsidiary) sold inventory above cost to Pundax, its parent. At 12/31/06, $4,000 of unrealized intercompany profit existed. Which of the following "postings" is made in consolidation at 12/31/06?

_____ In 2005, Polex sold inventory costing $100,000 to its 100%-owned subsidiary, Solex, for $150,000. At the end of 2005, Solex reported $60,000 of intercompany-acquired inventory in its balance sheet. What is the unrealized intercompany profit at 12/31/05?

The concept of profit on intercompany transactions to be deferred for consolidated reporting purposes is gross profit.

_____ In 2005, Palex sold inventory costing $45,000 to its 100%-owned subsidiary, Salex, for $70,000. By 12/31/05, Salex had resold all this inventory for $100,000. Which of the following accounts would have to be eliminated in consolidation at 12/31/05?

(Module 2) In 2007, Puncor resold for $77,000 inventory that it had acquired from Suncor (an 80%-owned subsidiary) in 2006 for $55,000. Suncor's cost was $44,000. Required: Prepare the consolidation entry or entries required at 12/31/07 under the partial equity method.

Fractional elimination is not allowed under current GAAP.

Intercompany inventory transfers at cost need not be eliminated in consolidation.

_____ In 2005, Punco sold inventory costing $60,000 to its 100%-owned subsidiary, Sunco, for $100,000. At 12/31/05, $20,000 of this inventory was reported in Sunco's balance sheet. In 2006, Sunco resold this inventory for $30,000. What is the unrealized intercompany profit at 12/31/05?

For the year ended 12/31/06, the adjusted financial statements of a home office and its branch show net income of $700,000 and $100,000, respectively. At the end of 2005, the home office adjusted the Intracompany Profit Deferred account by debiting it for $40,000, leaving a balance of $10,000. The combined net income for 2006 is

(Module 1) In 2006, Salco (a 100%-owned subsidiary of Palco) resold for $66,000 inventory that it had acquired from Palco in 2005 for $40,000. Palco's cost was $23,000. Salco reported $200,000 of net income for 2006. Required: a. Prepare the general ledger entry required at the end of 2006 under the complete equity method. b. Prepare the consolidation entry or entries required at 12/31/06.

(Module 2) In 2006, Salco (a 100%-owned subsidiary of Palco) resold for $66,000 inventory that it had acquired from Palco in 2005 for $40,000. Palco's cost was $23,000. Required: Prepare the consolidation entry or entries required at 12/31/06 under the partial equity method.

_____ In 2006, Semco resold for $55,000 inventory that it had acquired in 2005 from its parent, Pemco, for $30,000. Pemco's cost was $40,000. Which account is credited in consolidation at 12/31/06?

Complete the following analysis and prepare the related consolidation entry: