Results for question 4.
4
2 points possible
Parent manufactures heavy duty equipment used in excavating. On
January 3, 2011, parent sells a piece of equipment from its inventory
to 60% owned Sub for $720,000. Parent sold the equipment at 2 times its cost. Sub is using the equipment in the manufacture of its product, and depreciating it over six years using the straight-line method, with no salvage value estimated. At what net amount should the equipment be included in the consolidated balance sheet for Parent and Sub on 12/31/11 and 12/31/12? Waiting for grade
2011 Year of sale (in thousands)
Equipment
$720
Unrealized profit ($360)
Depreciation ($720/6 years) ($120)
Depreciation on unrealized profit ($360/6 years) $60
Equipment — net $300
Alternatively:
Equipment $360
Depreciation ($360,000/6 years) ($60)
Equipment — net $300
2012 Year after intercompany sale (in thousands)
Equipment — net beginning of the period $300
Depreciation ($60)
Equipment — net $240
Waiting for grade
Results for question 5.
5
2 / 2 points
Pelga Company routinely receives goods from its 80%-owned subsidiary, Swede Corporation. In 2014, Swede sold merchandise that cost $80,000 to Pelga for $100,000. Half of this merchandise remained in Pelga's December 31, 2014 inventory. This inventory was sold in 2015. During 2015, Swede sold merchandise that cost $160,000 to Pelga for $200,000. $62,500 of the 2015 merchandise inventory remained in Pelga's December 31, 2015 inventory. Selected income statement information for the two affiliates for the year 2015 was as follows:
Pelga
Swede
