Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 4, Problem 2.2E
To determine
To compute:.Gross profit to be recorded by both the parent and subsidiary companies.
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.
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If P acquired 90% of the outstanding common stock of S company. During 2015, P Company sells merchandise amounted 1800000 to S Company at 20% above cost. S Company had in its inventory half of the amount of goods purchased from P during 2015. If P company uses cost method, what eliminating entry will be recorded by P in 2016 to eliminate the Unrealized Profit in Inventory related to 2015?
Select one:
a. DR. Cost of goods sold 150000 CR. Inventory (ending) 150000
b. DR. Retained earnings 1/1 900000 CR. Inventory (ending) 900000
c. DR. Retained earnings 1/1 135000, NCI 15000 CR. Cost of goods sold 150000
d. DR. Retained earnings 1/1 150000 CR. Cost of goods sold 150000
e. DR. Retained earnings 1/1 810000, NCI 90000 CR. Cost of goods sold 900000
Pepper bought 70% of Salt on 1 July 2016. The following are the statements of profit or loss of Pepper and Salt for the year ended 31 March 2017.
Pepper Salt
GHS’000 GHS’000
Revenue 31,200 10,400
Cost of sales (17,800) (5,600)
Gross profit 13,400 4,800
Operating expenses (8,500) (3,200)
Profit from operations 4,900 1,600
Investment income 2,000
Profit before tax 6,900 1,600
Tax…
Marigold Corporation uses a perpetual inventory system and had inventory worth $73,500 at the beginning of the year. Purchases
were made during the year for $323,000; however, 10% of these goods were returned to the supplier, and a 3% discount was taken on
the remaining balance owing. Marigold paid $2,500 cash for freight to ship the inventory to its location during the year. Marigold
reported cost of goods sold for the year of $245,000. Marigold has a calendar year end.
What is the balance in the inventory account at the end of the year?
Balance $
Chapter 4 Solutions
Advanced Accounting
Ch. 4 - Prob. 1UTICh. 4 - Prob. 2UTICh. 4 - Prob. 3UTICh. 4 - Prob. 4UTICh. 4 - Prob. 5UTICh. 4 - Prob. 6UTICh. 4 - Sorel is an 80%-owned subsidiary of Pattern...Ch. 4 - Hide Corporation is a wholly owned subsidiary of...Ch. 4 - Prob. 2.2ECh. 4 - Prob. 3E
Ch. 4 - On January 1, 2016, Jungle Company sold a machine...Ch. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 5.1ECh. 4 - Prob. 5.2ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9.1ECh. 4 - Prob. 9.2ECh. 4 - Prob. 10.1ECh. 4 - Prob. 10.2ECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2.1PCh. 4 - Prob. 4.2.2PCh. 4 - Prob. 4.3.1PCh. 4 - Prob. 4.3.2PCh. 4 - Prob. 4.4.1PCh. 4 - Prob. 4.4.2PCh. 4 - Prob. 4.7.1PCh. 4 - Prob. 4.7.2PCh. 4 - Prob. 4.8.1PCh. 4 - Prob. 4.8.2PCh. 4 - OnJanuary 1, 2015, Peanut Company acquired 80% of...Ch. 4 - Prob. 4.11PCh. 4 - Prob. 4.13.1PCh. 4 - Prob. 4.13.2PCh. 4 - Prob. 4.14.1PCh. 4 - Prob. 4.14.2PCh. 4 - Prob. 4A.1APCh. 4 - Prob. 4A.2APCh. 4 - Prob. 4.1.1C
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- Heller Bottling Company began business in 2011, and ceased operations in 2015. Inventory unitspurchased and sold for the five years follow:Units Purchased Cost per Unit Units Sold2011 10,000 12 5,0002012 12,000 16 16,0002013 5,000 18 2,0002014 10,000 21 10,0002015 2,000 23 6,000a. Compute cost of goods sold for each of the five years if the company uses the following:a. LIFOb. FIFOc. Average cost (round cost/unit to two decimals, and COGS to the nearest dollar)b. Does the choice of a cost flow assumption affect total net income over the life of abusiness? Explain.c. If the choice of a cost flow assumption does not affect net income over the life of abusiness, how does the choice of LIFO give rise to a tax benefit?arrow_forwardDuring 2016, Jose Corporation transferred inventory from its home office to itsLaguna Branch at a billed price of P110,000. The inventory originally cost thecompany P90,000. The home office reported sales and cost of goods sold ofP1,400,000 and P590,000, respectively. The Laguna branch reported sales and costof goods sold of P675,000 and P300,000, respectively. All of the inventory had beensold by year – end. What is the cost of goods sold to be reported in the 2016 combined statement of comprehensive income?arrow_forwardWoody Ltd sold inventory items to its subsidiary Buzz Lightyear Ltd and had the following intercompany transactions: Cost of inventory $600 000 sold for $750 000 for the year ended 30 June 2022. One third of the inventory items were sold by Buzz Lightyear Ltd to external parties before the financial year end 30 June 2022. Cost of inventory $200 000 sold for $150 000 for the year ended 30 June 2023. Half of the inventory items were sold by Buzz Lightyear Ltd to external parties before the financial year end 30 June 2023. Ignoring taxes, which of the following statements is correct with respect to this transaction only for the year ended 30 June 2023 A. Consolidated sales will decrease by $200 000 Consolidated sales will increase by $550 000 Consolidated profit will increase by $125 000. C. Consolidated profit will increase by $24 000 D. B.arrow_forward
- Whispering Winds Corporation uses a perpetual inventory system and had inventory worth $88,500 at the beginning of the year. Purchases were made during the year for $393,000; however, 10% of these goods were returned to the supplier, and a 3% discount was taken on the remaining balance owing. Whispering Winds paid $3,500 cash for freight to ship the inventory to its location during the year. Whispering Winds reported cost of goods sold for the year of $295,000. Whispering Winds has a calendar year end. What is the balance in the inventory account at the end of the year? Balance If Whispering Winds counted its actual inventory balance as $118,000 at the end of the year, what adjusting entry, if any, would be made? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and…arrow_forwardOn January 1, 2016, LABRYNTH Co. purchased 50,000 units at $10 per unit. During 2016, the entity sold 40,000 units at $18 per unit. The entity paid $70,000 for operating expenses. The current replacement cost of the inventory on December 31, 2016 is $15 per unit. What is the net income under current cost accounting for the year 2016?arrow_forwardS Ltd(a partially owned subsidiary), sold inventories for the first time to its parent, P Itd during the reporting period ended 28 February 2015, at a profit mark up of 25% on cost price. On 28 February 2015 inventories to the value of R100 000 (at cost to P Ltd) were still on hand. The company tax rate is 28%. Total sales from S Ltd to P Ltd for the current reporting period amounted to R200 000. What are the correct journal entries for elimination of intragroup sales? Select one: O a. Dr Cost of sales R200 000(P), Cr Revenue(S) P/L R200 000 O b. Dr Revenue(S) (P/L) R200 000, Cr Cost of sales(P) R200 000 O . Dr Revenue(S)P/L R100 000, Cr Cost of sales(P) R100 000 O d. Dr Revenue(P) P/L R200 000 Cr Cost of sales(P)R200 000arrow_forward
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