Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various health stores during the year. Required: a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale of gnarl roots. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Journal entries recorded by Slim Company: Answer is complete and correct. General Journal No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C 3 Cost of goods-sold Inventory Journal entries recorded by Plump Corporation: 30 00 00 Debit Credit 150,000 150,000 60,000 60,000 40,000 40,000 Answer is complete but not entirely correct. General Journal Debit Credit 00 00 60,000 60,000 90,000 90,000 No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C 3 D 4 Cost of goods sold Inventory Income from Slim Investmerit in Slim 30 00 45.000 45,000 5,000 5.000
Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various health stores during the year. Required: a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale of gnarl roots. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Journal entries recorded by Slim Company: Answer is complete and correct. General Journal No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C 3 Cost of goods-sold Inventory Journal entries recorded by Plump Corporation: 30 00 00 Debit Credit 150,000 150,000 60,000 60,000 40,000 40,000 Answer is complete but not entirely correct. General Journal Debit Credit 00 00 60,000 60,000 90,000 90,000 No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C 3 D 4 Cost of goods sold Inventory Income from Slim Investmerit in Slim 30 00 45.000 45,000 5,000 5.000
Chapter3: Income Sources
Section: Chapter Questions
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Transcribed Image Text:Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in
producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the
end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various
health stores during the year.
Required:
a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale
of gnarl roots.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Journal entries recorded by Slim Company:
Answer is complete and correct.
General Journal
No
Event
A
1
Inventory
Cash (Accounts payable)
B
2
Cash (Accounts receivable)
Sales
C
3
Cost of goods-sold
Inventory
Journal entries recorded by Plump Corporation:
30
00
00
Debit
Credit
150,000
150,000
60,000
60,000
40,000
40,000
Answer is complete but not entirely correct.
General Journal
Debit
Credit
00
00
60,000
60,000
90,000
90,000
No
Event
A
1
Inventory
Cash (Accounts payable)
B
2
Cash (Accounts receivable)
Sales
C
3
D
4
Cost of goods sold
Inventory
Income from Slim
Investmerit in Slim
30
00
45.000
45,000
5,000
5.000
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