Advanced Accounting 14th Edition
Advanced Accounting 14th Edition
14th Edition
ISBN: 9781260726442
Author: By Joe Ben Hoyle And Thomas Schaefer And Timothy Doupnik
Publisher: Mc Grawhill Education
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Chapter 1, Problem 10P
To determine

Concept Introduction:

Intra-entity transactions: Transactions involving two companies from the same group at once are referred to as intra-group transactions. Since intra-group transactions result in double-counting of the effect of transactions, hence adjustments need to be made for intra-group transactions.

To Choose: The Correct Option

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Camille, Inc., sold $147,000 in inventory to Eckerle Company during 2020 for $245,000. Eckerle resold $109,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming that Camille owns 34 percent of Eckerle and applies the equity method, what journal entry is recorded at the end of 2020 to defer the intra-entity gross profit?
For the calendar year 2021, ABC Corporation, a retailer, has gross sales of Pl.4 billion, cost of sales of PS60 million, and permitted deductions of PISO million. Its total assets of PI80 million as of December 31, 2021, according to Audited Financial Statements, including PSO million in land and P25 million in building where the business entity is located, for a total of P75 million in fixed assets. Calkulate the Income Tax Due for CY 2021, assuming ABC Corporation is in its fifth year of operation.
Choose the correct. Perez, Inc., applies the equity method for its 25 percent investment in Senior, Inc. During 2018, Perez sold goods with a 40 percent gross profit to Senior, which sold all of these goods in 2018. How should Perez report the effect of the intra-entity sale on its 2018 income statement?a. Sales and cost of goods sold should be reduced by the amount of intra-entity sales.b. Sales and cost of goods sold should be reduced by 25 percent of the amount of intra-entity sales.c. Investment income should be reduced by 25 percent of the gross profit on the amount of intra-entity sales.d. No adjustment is necessary.
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