2 Wholey Foods Company, a 100% owned subsidiary of Amazonial Corporation, was purchased by Amazonialon January 1, 2019 for $500,000 and there were no differences between book value and fair value at date ofacquisition.Wholey Foods sells inventory to Amazonial at a 30% gross profit. The first year of intercompany sales was2019, the year of acquisition. The following data is available pertaining to inter-company transactions.201920202021I/C Sales20192020202115,00014,00022,000Wholey Foods had the following Net income and declared dividends for each of the three years.NetIncomeUnsold atYE$90,000125,000135,0001,5005,0004,000Dividendsdeclared$12,00012,00018,000 Answer the following - do not use ".xx" or "$" in your answers.1. Is this an upstream or downstream sale? (Respond with either "UPSTREAM" or "DOWNSTREAM")2. What is the amount of unrealized gross profit to be deferred as of the end of 2019?3. What is the value of the intercompany inventory unsold in consolidation at the end of 2020?4. What would be the net change to cost of goods sold on the 2020 consolidation worksheet (so when weconsolidate, what would be the total adjustment to COGS in the consolidation worksheet columns)?5. What is the Equity Income in Subsidiary that Amazonial would show on their separate legal entityfinancial statements for 2019?6. What is the Equity Investment balance that Amazonial would show on their separate legal entity financialstatements for 2021?

Lets understand the basics.When parent company sold goods to subsidiary then its known downstream…

Wholey Foods Company, a 100% owned subsidiary of Amazonial Corporation, was purchased by Amazonial on January 1, 2019 for $500,000 and there were no differences between book value and fair value at date of acquisition. Wholey Foods sells inventory to Amazonial at a 30% gross profit. The first year of intercompany sales was 2019, the year of acquisition. The following data is available pertaining to inter-company transactions. 2019 2020 I/C Sales 15,000 14.000 Unsold at YE 1,500 5.000

Wholey Foods Company, a 100% owned subsidiary of Amazonial Corporation, was purchased by Amazonial on January 1, 2019 for $500,000 and there were no differences between book value and fair value at date of acquisition. Wholey Foods sells inventory to Amazonial at a 30% gross profit. The first year of intercompany sales was 2019, the year of acquisition. The following data is available pertaining to inter-company transactions. 2019 2020 I/C Sales 15,000 14.000 Unsold at YE 1,500 5.000

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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