Exam 6: Intercompany Inventory Transactions

On January 1, 20X8, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the entire inventory to an unaffiliated company for $120,000 on November 21, 20X8. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 20X8. -Based on the information given above,what amount of consolidated net income will be assigned to the controlling shareholders for 20X8?

On January 1, 20X8, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the entire inventory to an unaffiliated company for $120,000 on November 21, 20X8. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 20X8. -Based on the information given above,what amount of sales will be reported in the 20X8 consolidated income statement?

Pink Corporation owns 80 percent of Sink Company's voting shares. During 20X4, Pink produced 60,000 smart phones at a cost of $62 each and sold 45,000 smart phones to Sink for $93 each. Sink sold 26,000 of the smart phones to unaffiliated companies for $128 each prior to December 31, 20X4, and sold the remainder in early 20X5 to unaffiliated companies for $133 each. Both companies use the perpetual inventory systems. -Based on the information given above,what amount of cost of goods sold did Sink record in 20X4?

During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary.The subsidiary also makes sales of inventory at a profit to its parent during the same year.Both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another.Consolidated revenues for the year should exclude:

When a parent and its subsidiary use a periodic inventory system rather than a perpetual system,the income and asset balances reported in the consolidated financial statements are: I.affected only if there are upstream intercompany sales of inventory. II.affected only if there are downstream intercompany sales of inventory.

Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows: -Assume Shove sold the inventory to Push.Using the fully adjusted equity method,what journal entry would be recorded by Push to recognize the realization of the 20X1 deferred intercompany profit and to defer the 20X2 unrealized gross profit on inventory sales to Shove?

On January 1,20X7,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 20X7,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 20X8,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 20X7 and 20X8 are as follows: Assume Jones uses the modified equity method to account for its investment in Smith. Required: a.Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X7. b.Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X8. Problem 67 (continued)

Selected information from the separate and consolidated balance sheets and income statements of Pare, Inc. and its subsidiary, Shel Co., as of December 31, 20X5, and for the year then ended is as follows: Additional information: During 20X5, Pare sold goods to Shel at the same markup on cost that Pare uses for all sales. -What was the amount of intercompany sales from Pare to Shel during 20X5?

ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. -Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X9?

On January 1, 20X1, Picture Company acquired 70 percent ownership of Seven Corporation at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Seven Corporation. On April 25, 20X1, Seven purchased inventory from Picture for $45,000. Seven sold the entire inventory to an unaffiliated company for $58,000 on October 12, 20X1. Picture had produced the inventory sold to Seven for $38,000. The companies had no other transactions during 20X1. -Based on the information given above,what amount of consolidated net income will be assigned to the controlling shareholders for 20X1?

A newly created subsidiary sold all of its inventory to its parent at a profit in its first year of existence.The parent,in turn,sold all but 20 percent of the inventory to unaffiliated companies,recognizing a profit.The parent had no other sales during the year.The amount that should be reported as cost of goods sold in this year's consolidated income statement should be:

ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. -Based on the information given above,what amount of cost of goods sold must be reported in the consolidated income statement for 20X8?

Elvis Company purchases inventory for $70,000 on Mar 19, 20X8 and sells it to Graceland Corporation for $95,000 on May 14, 20X8. Graceland still holds the inventory on December 31, 20X8, and determines that its market value (replacement cost) is $82,000 at that time. Graceland writes the inventory down from $95,000 to its lower market value of $82,000 at the end of the year. Elvis owns 75 percent of Graceland. -Based on the information given above,what amount of cost of goods sold should be eliminated in the consolidation worksheet for 20X8?

Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows: Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company. -Based on the information given above,what will be the consolidated net income for 20X7?

Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock. During 20X8, Parent sold inventory purchased in 20X7 for $48,000 to Subsidiary 1 for $60,000. Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2. Prior to December 31, 20X8, Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31, 20X8. -Based on the information given above,what amount should be reported in the December 31,20X8,consolidated balance sheet as inventory?

On January 1, 20X8, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the entire inventory to an unaffiliated company for $120,000 on November 21, 20X8. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 20X8. -Based on the information given above,what amount of cost of goods sold will be reported in the 20X8 consolidated income statement?

On January 1, 20X1, Picture Company acquired 70 percent ownership of Seven Corporation at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Seven Corporation. On April 25, 20X1, Seven purchased inventory from Picture for $45,000. Seven sold the entire inventory to an unaffiliated company for $58,000 on October 12, 20X1. Picture had produced the inventory sold to Seven for $38,000. The companies had no other transactions during 20X1. -Based on the information given above,what amount of cost of goods sold will be reported in the 20X1 consolidated income statement?

Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows: Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company. -Based on the information given above,what will be the income to noncontrolling interest for 20X8?

Which of the following are examples of intercompany balances and transactions that must be eliminated in preparing consolidated financial statements? I.Security holdings II.Interest and dividends III.Sales and purchases

Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of Scrooge Corporation. Pilfer purchased inventory from Scrooge for $90,000 on August 20, 20X8, and resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100,000. Scrooge produced the inventory sold to Pilfer for $67,000. The companies had no other transactions during 20X8. -Based on the information given above,what amount of cost of goods sold will be reported in the 20X8 consolidated income statement?