Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin’s books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends. 202020212022Anderson’s net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2022 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 intra-entity transfer of merchandise?Multiple Choice$3,000.$2,400.$1,000.$800.$900. DO NOT GIVE SOLUTION IN IMAGE FORMAT

In the consolidated financial statements, inter-entity transactions between parent and subsidiary…

Answered: Anderson Company, a 90% owned…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

	2020	2021	2022
Purchases by Philbin	$	8,000		$	12,000	$	15,000
Ending inventory on Philbin’s books		1,200			4,000		3,000

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

	2020	2021	2022
Anderson’s net income	$	70,000		$	85,000	$	94,000
Dividends paid by Anderson		10,000			10,000		15,000

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2022 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 intra-entity transfer of merchandise?

Multiple Choice

$3,000.

$2,400.

$1,000.

$800.

$900.

DO NOT GIVE SOLUTION IN IMAGE FORMAT

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