Exam 6: Intercompany Inventory Transactions

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 must be reported in the consolidated income statement for 20X4?

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. -In Pare's consolidating worksheet,what amount of unrealized intercompany profit was eliminated?

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 did XYZ record in 20X8?

Senior Inc.owns 85 percent of Junior Inc.During 20X8,Senior sold goods with a 25 percent gross profit to Junior.Junior sold all of these goods in 20X8.How should 20X8 consolidated income statement items be adjusted?

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 of inventory must be eliminated from the consolidated balance sheet for 20X8?

Perth Corporation owns 90 percent of Dundee Company's stock. At the end of 20X8, Perth and Dundee reported the following partial operating results and inventory balances: Perth regularly prices its products at cost plus a 30 percent markup for profit. Dundee prices its sales at cost plus a 10 percent markup. The total sales reported by Perth and Dundee include both intercompany sales and sales to nonaffiliates. -Based on the information given above,what balance will be reported for inventory in the consolidated balance sheet for December 31,20X8?

The consolidation treatment of profits on inventory transfers that occurred before the business combination depends on whether: I.the companies were independent at that time. II.the sale transaction was the result of arm's-length bargaining.

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 defer the unrealized gross profit on inventory sales to Shove in 20X1?

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 inventory balance will be reported by the consolidated entity on December 31,20X8?

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 must be eliminated from the consolidated income statement for 20X4?

Salmon Corporation owns 65 percent of Trout Company's stock. At the end of 20X3, Salmon and Trout reported the following partial operating results and inventory balances: Salmon regularly prices its products at cost plus a 40 percent markup for profit. Trout prices its sales at cost plus a 25 percent markup. The total sales reported by Salmon and Trout include both intercompany sales and sales to nonaffiliates. -Based on the information given above,what balance will be reported for inventory in the consolidated balance sheet for December 31,20X3?

Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows: -Assume Push sold the inventory to Shove.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?

Consolidated net income may include the parent's separate operating income plus the parent's share of the subsidiary's reported net income:

Perth Corporation owns 90 percent of Dundee Company's stock. At the end of 20X8, Perth and Dundee reported the following partial operating results and inventory balances: Perth regularly prices its products at cost plus a 30 percent markup for profit. Dundee prices its sales at cost plus a 10 percent markup. The total sales reported by Perth and Dundee include both intercompany sales and sales to nonaffiliates. -Based on the information given above,what amount of sales will be reported in the consolidated income statement for 20X8?

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 consolidated net income will be assigned to the controlling interest 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 income assigned to controlling interest for 20X7?

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 inventory should be eliminated in the consolidation worksheet for 20X8?

Binary Company acquired 75 percent ownership of Fordham Corporation in 20X5, at underlying book value. On that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Fordham Corporation. Binary purchased inventory from Fordham for $150,000 on July 24, 20X6, and resold 90 percent of the inventory to unaffiliated companies on November 11, 20X6, for $160,000. Fordham produced the inventory sold to Binary for $120,000. The companies had no other transactions during 20X6. -Based on the information given above,what inventory balance will be reported by the consolidated entity on December 31,20X6?

Salmon Corporation owns 65 percent of Trout Company's stock. At the end of 20X3, Salmon and Trout reported the following partial operating results and inventory balances: Salmon regularly prices its products at cost plus a 40 percent markup for profit. Trout prices its sales at cost plus a 25 percent markup. The total sales reported by Salmon and Trout include both intercompany sales and sales to nonaffiliates. -Based on the information given above,what amount of sales will be reported in the consolidated income statement for 20X3?

Binary Company acquired 75 percent ownership of Fordham Corporation in 20X5, at underlying book value. On that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Fordham Corporation. Binary purchased inventory from Fordham for $150,000 on July 24, 20X6, and resold 90 percent of the inventory to unaffiliated companies on November 11, 20X6, for $160,000. Fordham produced the inventory sold to Binary for $120,000. The companies had no other transactions during 20X6. -Based on the information given above,what amount of consolidated net income will be assigned to the controlling interest for 20X6?