(a)
Introduction: Sales refer to a transaction between two parties in which one party sells a product or a service and another party purchases those goods and services in exchange for a consideration, usually monetary in nature.
The amount reported in the consolidated income statement as sales.
(a)
Answer to Problem 6.28P
Sales to be recorded in the consolidated income statement is $790,000
Explanation of Solution
Calculation of sales
Particulars | Amount (in $) | Amount (in $) |
Reported sales of B | 660,000 | |
Reported sales of H | 510,000 | |
1,170,000 | ||
Intercompany sales by B | 140,000 | |
Intercompany sales by H | 240,000 | (380,000) |
Sales reported on consolidated income statement | 790,000 |
(b)
Introduction: The cost of goods sold refers to the cost of acquisition or manufacturing of goods that a company sells during a particular period. The cost of goods sold includes the cost of materials and labor used in the manufacturing and other associated costs.
The amount reported in the consolidated income statement as cost of goods sold
(b)
Answer to Problem 6.28P
Cost of goods sold to be recorded in the consolidated income statement is $536,429
Explanation of Solution
Calculation of cost of goods sold
Particulars | B (in $) | H (in $) |
Seles reported | 660,000 | 510,000 |
Ratio of cost to sales price | 1.4 | 1.2 |
Cost of goods sold | 471,429 | 425,000 |
Amount to be eliminated | (128,000) | (232,000) |
Cost of goods sold adjusted | (343,429) | (193,000) |
Cost of goods sold | 536,429 |
(c)
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.
(c)
Answer to Problem 6.28P
The consolidated net income is $70,000
The income assigned to controlling interest is $67,600
Explanation of Solution
Consolidated net income:
Particulars | Amount (in $) | Amount (in $) |
Operating income of B | 70,000 | |
Net income of H | 20,000 | |
Total income | 90,000 | |
Less: unrealized inventory profits of B | (12,000) | |
unrealized inventory profits of H | (8,000) | |
Consolidated net income | 70,000 |
Income assigned to controlling interest:
Particulars | Amount (in $) |
Consolidated net income | 70,000 |
Less: income assigned to non- controlling interest | (2,400) |
Income assigned to controlling interest | 67,600 |
(d)
Introduction: Inventory refers to the goods that a business holds with the ultimate goal of resale. It includes only the finished goods or unfinished goods to be ultimately used in the production process. It is classified as a current asset in the balance sheet of the company.
The inventory balance reported in the consolidated balance sheet for 20X8
(d)
Answer to Problem 6.28P
The amount of inventory to be reported in the 20X8 balance sheet is $70,000
Explanation of Solution
Inventory:
Particulars | Amount (in $) | Amount (in $) |
Inventory reported by B | 48,000 | |
Unrealized profits | (8,000) | 40,000 |
Inventory reported by H | 42,000 | |
Unrealized profit | (12,000) | 30,000 |
Inventory as on December, 20X5 | 70,000 |
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Chapter 6 Solutions
ADVANCED FINAN.ACCT.(LOOSELEAF)>CUSTOM<
- Sweeny Corporation owns 60 percent of Bitner Company's shares. Partial 20X2 financial data for the companies and consolidated entity were as follows: Sweeny Corporation Bitner Company Consolidated Totals Sales $550,000 $450,000 $820,000 Cost of Goods Sold 310,000 300,000 420,000 Inventory, Dec. 31 180,000 210,000 375,000 On January 1, 20X2, Sweeny's inventory contained items purchased from Bitner for $75,000. The cost of the units to Bitner was $50,000. Bitner made all intercorporate sales during 20X2 to Sweeny. Required: What amount of intercorporate sales occurred in 20X2? How much unrealized intercompany profit existed on January 1, 20X2? On December 31, 20X2? Give the worksheet consolidation entries relating to inventory and cost of goods sold needed to prepare consolidated financial statements for 20X2. If Bitner reports a net income of $90,000 for 20X2, what amount of income is assigned to the noncontrolling interest in the 20X2…arrow_forwardTop Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports sales of $800,000 and cost of goods sold of $600,000. For this same period, Bottom has sales of $300,000 and cost of goods sold of $180,000. During the current year, Top sold merchandise to Bottom for $100,000. The subsidiary still possesses 40 percent of this inventory at the current year end. Required: Make the necessary elimination entries Compute consolidated sales and cost of goods sold Bellgrade, Inc., acquired a 60 percent interest in Hansen Company several years ago. During 2011, Hansen sold inventory costing $75,000 to Bellgrade for $100,000. A total of 16 percent of this inventory was not sold to outsiders until 2012. During 2012, Hansen sold inventory costing $96,000 to Bellgrade for $120,000. A total of 35 percent of this inventory was not sold to outsiders until 2013. In 2012, Bellgrade reported cost of goods sold of $380,000 while Hansen reported $210,000.…arrow_forwardTop Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports sales of $800,000 and cost of goods sold of $600,000. For this same period, Bottom has sales of $300,000 and cost of goods sold of $180,000. During the current year, Top sold merchandise to Bottom for $100,000. The subsidiary still possesses 40 percent of this inventory at the current year-end. Top had established the transfer price based on its normal gross profit rate. Assume that the transfers were from Bottom Company to Top Company. What are the consolidated sales and cost of goods sold?a. $1,000,000 and $720,000b. $1,000,000 and $755,000c. $1,000,000 and $696,000d. $970,000 and $712,000arrow_forward
- Premier Company owns 90 percent of the voting shares of Stanton, Inc. Premier reports sales of $480,000 during the current year and Stanton reports $264,000. Stanton sold inventory costing $28,800 to Premier (upstream) during the year for $57,600. Of this amount, 25 percent is still in ending inventory at year-end. Total receivables on the consolidated balance sheet were $81,800 at the first of the year and $119,100 at year-end. No intra-entity debt existed at the beginning or ending of the year. Using the direct method, what is the consolidated amount of cash collected by the business combination from its customers?a. $706,700b. $649,100c. $686,400d. $744,000arrow_forwardKK Corporation owns 80 percent of LL Corporation’s common stock. During October, LL sold merchandise to KK for P100.000. At December 31, 50 percent of this merchandise remains in KK’s inventory. Gross profit percentages were 30 percent for KK and 40 percent for LL. The amount of unrealized intercompany profit in ending inventory at December 31 that should eliminated in the consolidation process isarrow_forwardSweeny Corporation owns 60 per cent of Bitner Company's shares. Partial 20X2 financial data for the companies and consolidated entity were as follows: Sweeny Corporation Bitner Company Consolidated Totals Sales $550,000 $450,000 $820,000 Cost of Goods Sold 310,000 300,000 420,000 Inventory, Dec. 31 180,000 210,000 375,000 On January 1, 20X2, Sweeny's inventory contained items purchased from Bitner for $75,000. The cost of the units to Bitner was $50,000. Bitner made all intercorporate sales during 20X2 to Sweeny. Required: 1. What amount of intercorporate sales occurred in 20X2? 2. How much unrealized intercompany profit existed on January 1, 20X2? On December 31, 20X2? 3. Give the worksheet consolidation entries relating to inventory and cost of goods sold needed to prepare consolidated financial statements for 20X2 4. If Bitner reports a net income of $90,000 for 20X2, what amount of income is assigned to the noncontrolling interest…arrow_forward
- Top Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports sales of $800,000 and cost of goods sold of $600,000. For this same period, Bottom has sales of $300,000 and cost of goods sold of $180,000. During the current year, Top sold merchandise to Bottom for $100,000. The subsidiary still possesses 40 percent of this inventory at the current year-end. Top had established the transfer price based on its normal gross profit rate. What are the consolidated sales and cost of goods sold?a. $1,000,000 and $690,000b. $1,000,000 and $705,000c. $1,000,000 and $740,000d. $970,000 and $696,000arrow_forwardPP Corp. owned 80% of KK Corp.'s common stock. During October 20x9, KK sold merchandise to PP for P140,000. At December 31, 20x9, 50% of this merchandise remained in Prince's inventory. For 20x9, gross profit percentages were 30% of sales for PP and 40% of sales for KK. The amount of unrealized intercompany profit in ending inventory at December 31, 20x9 that should be eliminated in the consolidation process isarrow_forwardTT Company holds 90 percent of BB Company’s common stock. In the current year, TT reports sales of P800,000 and cost of goods sold of P600,000. For this same period, BB has sales of P300,000 and cost of goods sold of P180,000. During the current year, TT sold merchandise to BB for P100,000. The subsidiary still possesses 40 percent of this inventory at the current year-end. TT had established the transfer price based on its normal markup. What are the cost of goods sold?arrow_forward
- Sharpe electronics corp holds a 75% stake in worldwide electronics corp. On Oct 29, 20x4, from a nonaffiliated. Worldwide sold the inventory to sharpe for $10000 on Nov.15, 20X4. Sharpe resold this inventory to a non affiliate on Jan 25, 20X5. Assuming that sharpe had separate operating income of $300,000 and worldwide had net income of 350000 for 20X4, Calculate worldwide realized income for 20X4.arrow_forwardCC Company sold inventory with a cost of P40,000 to its 90%-owned subsidiary, RR Corp., for P100,000 in 20X9. Range resold P75,000 of this inventory for P100,000 in 20X9. Based on this information, the amount of inventory reported on the consolidated financial statements at the end of 20X4 isarrow_forwardProblems 7 and 8 are based on the following information.Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned subsidiary Oakley Co. follow:Additional Information for Fiscal Year 2018• Iverson and Oakley’s consolidated net income was $45,000.• Oakley paid $5,000 in dividends during the year. Iverson paid $12,000 in dividends.• Oakley sold $11,000 worth of merchandise to Iverson during the year.• There were no purchases or sales of long-term assets during the year.In the 2018 consolidated statement of cash flows for Iverson Company:Net cash flows from operating activities werea. $12,000b. $20,000c. $24,000d. $25,000arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning