ADVANCED ACCOUNTING-LL
ADVANCED ACCOUNTING-LL
13th Edition
ISBN: 9781260232486
Author: Hoyle
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 5, Problem 21P

Akron, Inc., owns all outstanding stock of Toledo Corporation. Amortization expense of $15,000 per year for patented technology resulted from the original acquisition. For 2018, the companies had the following account balances:

Akron Toledo
Sales $1,100,000 $600,000
Cost of goods sold 500,000 400,000
Operating expenses 400,000 220,000
Investment income Not given –0–
Dividends declared 80,000 30,000

  Intra-entity sales of $320,000 occurred during 2017 and again in 2018. This merchandise cost $240,000 each year. Of the total transfers, $70,000 was still held on December 31, 2017, with $50,000 unsold on December 31, 2018.

  a.    For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here?

  b.    Prepare a consolidated income statement for the year ending December 31, 2018.

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How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License