Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 4, Problem 1UTI
To determine
To determinbe:.The type of errors that would be there on the consolidated income statement and balance sheet in case no adjustments were made on the consolidated worksheet.
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.
Expert Solution & Answer
Explanation of Solution
Errors that would be there in the consolidated income statement and balance sheet in the absence of consolidation adjustments are listed as follows:
Unsold stock in the balance sheet would incude a profit of $3,000
- Sales figures and cost of goods sold figure of the consolidated income statement would show inflated values. Sales figures would include sales made to subsidiary, as well as sales made to an outside party. Similarly, COGS would include cost to parent as well cost to subsidiary. This would result in decrease of gross profit percentage.
Therefore sales made by seller to buyer should be eliminated, COGS of the buyer should be eliminated, profit component of COGS remaining unsold is eliminated and profit included in the unsold inventory should be eliminated.
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Students have asked these similar questions
During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. If no adjustments were made on the consolidated worksheet, what errors would there be on the consolidated income statement and balance sheet?
During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. What specific adjustments are needed on the consolidated worksheet to deal with these issues?
The following information is available for Kingbird Inc. for the year ended December 31, 2017:
Loss on discontinued operations
$65,000
Retained earnings January 1, 2017
$1,120,000
Rent revenue
85,000
Selling expenses
860,000
Income tax applicable to continuing operations
288,000
Income tax applicable to loss on discontinued operations
22,000
Administrative expenses
500,000
Cost of goods sold
1,620,000
Loss on write-down of inventory
32,000
Sales revenue
3,715,000
Gain on sale of equipment
30,000
Cash dividends declared
210,000
Unrealized gain on available-for-sale securities
20,000
Interest expense
45,000
200,000 shares were outstanding during all of 2017. Prepare a multiple-step income statement. (Round earnings per share to 2 decimal places, e.g. 1.45.)
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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