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 cost of goods sold will be reported in the 20X8 consolidated income statement?

Potter Company acquired 75 percent ownership of Snape 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 Snape Corporation.Potter purchased inventory from Snape for $150,000 on July 24,20X6,and resold 90 percent of the inventory to unaffiliated companies on November 11,20X6,for $160,000.Snape produced the inventory sold to Potter 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?

Potter Company acquired 75 percent ownership of Snape 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 Snape Corporation.Potter purchased inventory from Snape for $150,000 on July 24,20X6,and resold 90 percent of the inventory to unaffiliated companies on November 11,20X6,for $160,000.Snape produced the inventory sold to Potter for $120,000.The companies had no other transactions during 20X6. -Based on the information given above,what amount of sales will be reported in the 20X6 consolidated income statement?

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:

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?