Exam 5: Consolidated Financial Statements - Intra-Entity Asset Transactions

Yukon Co.acquired 75% percent of the voting common stock of Ontario Corp.on January 1,2011.During the year,Yukon made sales of inventory to Ontario.The inventory cost Yukon $260,000 and was sold to Ontario for $390,000.Ontario still had $60,000 of the goods in its inventory at the end of the year.The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2011 is

Prince Corp.owned 80% of Kile Corp.'s common stock.During October 2011,Kile sold merchandise to Prince for $140,000.At December 31,2011,50% of this merchandise remained in Prince's inventory.For 2011,gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.The amount of unrealized intercompany profit in ending inventory at December 31,2011 that should be eliminated in the consolidation process is

Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011. Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. -How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost,but from Stendall to Edgar?

How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation?

On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. -For consolidation purposes,what net debit or credit will be made for the year 2010 relating to the accumulated depreciation for the equipment transfer?

On January 1, 2011, Musial Corp. sold equipment to Matin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method. Musial earned $308,000 in net income in 2011 (not including any investment income) while Matin reported $126,000. Assume there is no amortization related to the original investment. -Assuming that Musial owned only 90% of Matin,what is consolidated net income for 2009?

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2010Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 -Compute the amortization of gain through a depreciation adjustment for 2011 for consolidation purposes.

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2010. Purchases by Posito \ 8,000 \ 12,000 \ 15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Gargiulo's net income \ 70,000 \ 85,000 \ 94,000 Dividends paid by Gargiulo 10,000 10,000 15,000 -Compute the equity in earnings of Gargiulo reported on Posito's books for 2011.

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2010. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. -In the consolidation worksheet for 2010,which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory?

On November 8,2011,Power Corp.sold land to Wood Co. ,its wholly owned subsidiary.The land cost $61,500 and was sold to Wood for $89,000.From the perspective of the combination,when is the gain on the sale of the land realized?

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2010. Purchases by Posito \ 8,000 \ 12,000 \ 15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Gargiulo's net income \ 70,000 \ 85,000 \ 94,000 Dividends paid by Gargiulo 10,000 10,000 15,000 -For consolidation purposes,what amount would be debited to cost of goods sold for the 2010 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise?

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2010. Purchases by Posito \ 8,000 \ 12,000 \ 15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Gargiulo's net income \ 70,000 \ 85,000 \ 94,000 Dividends paid by Gargiulo 10,000 10,000 15,000 -Compute the noncontrolling interest in Gargiulo's net income for 2010.

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2010, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2010 and 2011, respectively. Leo uses the equity method to account for its investment. -Compute income from Stiller on Leo's books for 2011.

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. -Compute Parker's reported gain or loss relating to the land for 2012.

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. -In the consolidation worksheet for 2010,which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory?

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider. -At what amount should the equipment (net of depreciation)be included in the consolidated balance sheet dated December 31,2011?

On April 7,2011,Pate Corp.sold land to Shannahan Co. ,its subsidiary.From a consolidated point of view,when will the gain on this transfer actually be earned?

What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset?

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. -Compute consolidated sales.

Parent sold land to its subsidiary for a gain in 2008.The subsidiary sold the land externally for a gain in 2011.Which of the following statements is true?