ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Textbook Question
Chapter 6, Problem 6.1.4E
Multiple−Choice Questions on Intercompany Inventory Transfers [AICPA Adapted]
Select the correct answer a for each of the following questions:
Note: Items 3 and 4 are based on the following information:
Nolan owns 100 percent of the capital stock of both Twill Corporation and Webb Corporation. Twill purchases merchandise inventory from Webb at 140 percent of Webb’s cost. During 20X0. Webb sold merchandise that had cost it $40,000 to Twill. Twill sold all of this merchandise to unrelated customers for $81,200 during 20X0. In preparing combined financial statements for 20X0. Nolan’s bookkeeper disregarded the common ownership of Twill and Webb.
4. By what amount was unadjusted revenue overstated in the combined income statement of 20X0?
- $16,000
- $40,000
- $56,000
- $81,200
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Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.
2020
2021
2022
Purchases by Philbin
$
8,000
$
12,000
$
15,000
Ending inventory on Philbin’s books
1,200
4,000
3,000
Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.
2020
2021
2022
Anderson’s net income
$
70,000
$
85,000
$
94,000
Dividends paid by Anderson
10,000
10,000
15,000
For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2022 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 intra-entity transfer of merchandise?
Multiple Choice
$3,000.…
Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.
2020
2021
2022
Purchases by Philbin
$
8,000
$
12,000
$
15,000
Ending inventory on Philbin’s books
1,200
4,000
3,000
Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.
2020
2021
2022
Anderson’s net income
$
70,000
$
85,000
$
94,000
Dividends paid by Anderson
10,000
10,000
15,000
For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2020 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2020 intra-entity transfer of merchandise?
2.
Martindale Company, a 100% owned subsidiary of Weisman Corporation, sells inventory to Weisman at a 20% profit on selling price. The following data are available pertaining to inter-company purchases by Weisman: Inter-company sales: Unsold at year end (based on selling price): 2020: $18,000 2020: $4,000 2021: $19,400 2021: $6,000 2022: $21,500 2022: $8,000 Martindale's profit numbers were $125,000, $142,000 and $265,000 for 2020, 2021, and 2022, respectively. Weisman received dividends from Martindale of $25,000 for 2020 and 2021, and $30,000 for 2022. Assume Weisman uses the equity method to account for its investment in Martindale. What is the balance in pre-consolidation Income (loss) from subsidiary for 2022? Select one: A. $268,600 B. $235,000 C. $265,400 D. $264,600
Chapter 6 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 6 - Why must inventory transfers to related companies...Ch. 6 - Why is there a need for a consolidation entry when...Ch. 6 - Prob. 6.3QCh. 6 - How do unrealized intercompany profits on a...Ch. 6 - How do unrealized intercompany profits on an...Ch. 6 - Prob. 6.6QCh. 6 - Prob. 6.9QCh. 6 - Prob. 6.10QCh. 6 - How is the amount of consolidated retained...Ch. 6 - How will the elimination of unrealized...
Ch. 6 - Prob. 6.14QCh. 6 - Is an inventory sale from one subsidiary to...Ch. 6 - Prob. 6.16QCh. 6 - Prob. 6.1.1ECh. 6 - Prob. 6.1.2ECh. 6 - MultipleChoice Questions on Intercompany Inventory...Ch. 6 - MultipleChoice Questions on Intercompany Inventory...Ch. 6 - Prob. 6.1.5ECh. 6 - Prob. 6.1.6ECh. 6 - Prob. 6.3.1ECh. 6 - Prob. 6.3.2ECh. 6 - Prob. 6.3.3ECh. 6 - Prob. 6.4.1ECh. 6 - Prob. 6.4.2ECh. 6 - Prob. 6.4.3ECh. 6 - Prob. 6.4.4ECh. 6 - Prob. 6.5.1ECh. 6 - Prob. 6.5.2ECh. 6 - Prob. 6.5.3E
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