GEN CMB ADV FINCL ACCT; Connect Access Card
11th Edition
ISBN: 9781259546648
Author: Theodore E. Christensen
Publisher: McGraw-Hill Education
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Chapter 6, Problem 6.22P
a.
To determine
Introduction:
Consolidating entries to complete a consolidated worksheet for 20X8
a.
Expert Solution
Explanation of Solution
Journal entries
| S.no | Date | Particulars | Debit | Credit |
| 1 | Income from subsidiary | $32,000 | ||
| Income from SF stock | $32,000 | |||
| (To record C’s 80% share of S’s income) | ||||
| 2 | Income to non- controlling interest | $9,000 | ||
| Non-controlling interest | $9,000 | |||
| (To record non-controlling interest of net income of S) | ||||
| 3 | Common stock- SF | $90,000 | ||
| $220,000 | ||||
| Investment in SF stock | $248,000 | |||
| Non- controlling stock | $62,000 | |||
| (To record basic elimination entry) | ||||
| 4 | Retained earnings as on Jan 1 | $16,000 | ||
| Non-controlling interest | $4,000 | |||
| Cost of goods sold | $20,000 | |||
| (To record reversal of the deferred gross profit) | ||||
| 5 | Sales | $150,000 | ||
| Cost of goods sold | $135,000 | |||
| Inventory | $15,000 | |||
| To eliminate the unrealized inventory profit) |
- Recording the eliminating entry for elimination of income from subsidiary.
- Recording the eliminating entry for assigning income to non-controlling interest.
- Recording the eliminating entry for elimination of beginning investment balance.
- Recording the eliminating entry for elimination of beginning inventory profit.
- Recording the eliminating entry for elimination of unrealized inventory profit.
b.
To determine
Introduction: The consolidated income is the difference between the sum of the total operating income of the parent company and the net income of the subsidiary and the unrealized inventory profits of the two. The income assigned to controlling interest is the difference between income assigned to non-controlling interest and the consolidated net income.
The amount reported as consolidated net income and income assigned to the controlling interest.
b.
Expert Solution
Answer to Problem 6.22P
The consolidated net income is $90,000
The income assigned to controlling interest is $81,000
Explanation of Solution
Consolidated net income
| Particulars | Amount | Amount |
| Operating income of CA | $45,000 | |
| Net income of SF | $40,000 | |
| Total income | $85,000 | |
| inventory profits realized in 20X7 | $20,000 | |
| Unrealized inventory profits for 20X8 | ($15,000) | |
| Consolidated net income | $90,000 |
Income assigned to controlling interest
| Particulars | Amount |
| Consolidated net income | $90,000 |
| Less: income assigned to non- controlling interest | ($9,000) |
| Income assigned to controlling interest | $81,000 |
c.
To determine
Introduction: A non-controlling interest refers to an ownership position in which the shareholders hold less than 50 percent of the total shares in the company and have no control over its decisions.
Income assigned to non- controlling shareholders.
c.
Expert Solution
Answer to Problem 6.22P
Income assigned to non-controlling shareholders is $67,000.
Explanation of Solution
| Particulars | Amount |
| Common stock | $90,000 |
| Retained earnings | $260,000 |
| Less: unrealized inventory profit | ($15,000) |
| Proportion of stock held by non-controlling interest | 20% |
| Income assigned to non- controlling shareholders | $67,000 |
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PROBLEM ON INTERCOMPANY SALES
Timmy Co. acquired 80% interest in Princess Bubblegum Company on January 2, 2018 for $2,520,000. On this date, the share capital and retained earnings of the two companies are:
Timmy Co.
Princess Bubblegum Co.
Share Capital
$6,000,000
$2,250,000
Retained Earnings
3,000,000
450,000
On January 2, 2018:
the assets and liabilities of Princess Bubblegum Co. were stated at their fair values except for machinery (remaining life 3 years) which is $225,000 lower than its fair value.
On September 30, 2018:
Princess Bubblegum sold merchandise to Timmy Co. at an inter-company profit of $150,000; 25% was still unsold at year-end.
On October 1, 2019:
Princess Bubblegum purchased merchandise from Timmy for $3,600,000. The selling affiliate included a 20% mark-up cost on this date. Only 75% of these purchases had been sold to unrelated parties as of December 31, 2019.
As of December 31, 2019, goodwill was determined to be impaired by $60,000. The…
James Corporation owns 80 percent of Carl Corporation’s common stock. During October, Carl sold merchandise to James for $250,000. At December 31, 40 percent of this merchandise remains in James’s inventory. Gross profit percentages were 20 percent for James and 30 percent for Carl. The amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process isa. $24,000b. $30,000c. $20,000d. $75,000
Chapter 6 Solutions
GEN CMB ADV FINCL ACCT; Connect Access Card
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. 6.5.3ECh. 6 - Prob. 6.7ECh. 6 - Prob. 6.8ECh. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Prob. 6.11ECh. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Prob. 6.15ECh. 6 - Prior-Period Inventory Profits Home Products...Ch. 6 - Prob. 6.17PCh. 6 - Prob. 6.18PCh. 6 - Prob. 6.19PCh. 6 - Prob. 6.20PCh. 6 - Prob. 6.21PCh. 6 - Prob. 6.22PCh. 6 - Prob. 6.24PCh. 6 - Prob. 6.26PCh. 6 - Prob. 6.27PCh. 6 - Prob. 6.28PCh. 6 - Prob. 6.29PCh. 6 - Prob. 6.30PCh. 6 - Prob. 6.31PCh. 6 - Prob. 6.33PCh. 6 - Prob. 6.34PCh. 6 - Prob. 6.35APCh. 6 - Prob. 6.36AP
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