Advanced Accounting 14th Edition
14th Edition
ISBN: 9781260726442
Author: By Joe Ben Hoyle And Thomas Schaefer And Timothy Doupnik
Publisher: Mc Grawhill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 17P
To determine
Concept Introduction:
When a company has two or more subsidiaries, if it maintains a single income statement with all the subsidiaries, then it is called a consolidated income statement. It’s a part of the consolidated financial statement. It is a report that compiles all of a parent company's and subsidiary's actions into one document.
To prepare:
Consolidated income statement of Company B.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent of Cleveland's outstanding stock. No excess amortization resulted from these acquisitions. During the current year, Cleveland sold a variety of inventory items to Wisconsin for $40,000 although the original cost was $30,000. Of this total, Wisconsin still held $12,000 in inventory (at transfer price) at year-end.
During this same period, Wisconsin sold merchandise to Baxter for $100,000 although the original cost was only $70,000. At year-end, $40,000 of these goods (at the transfer price) was still on hand.
The initial value method was used to record each of these investments. None of the companies holds any other investments.
Using the following separate income statements, determine the figures that would appear on a consolidated income statement:
Baxter
Wisconsin
Cleveland
Sales
$
(1,000,000
)
$
(450,000
)
$
(280,000
)
Cost of goods sold…
Acker Inc. bought 40% of Howell Co. on
January 1, 2020 for $576,000. The equity
method of accounting was used. The book
value and fair value of the net assets of
Howell on that date were $1,440,000. Acker
began supplying inventory to Howell as
follows:
YEAR/ COST TO ACKER/ TRANSFER PRICE/
AMOUNT HELD BY HOWELL AT YEAR-END:
2020/ $55,000/ $75,000/ $15,000
2021/ $70,000/ $110,000/ $55,000
Howell reported net income of $100,000 in
2020 and $120,000 in 2021 while paying
$40,000 in dividends each year.
what is the equity in Howell income that
should be reported by Acker in 2021?
options are
$32,000 - $41,600 - $48,000 - $49,600 -
$50,600
In 20X6, Vines Inc. (Vines) purchased 40% of the common shares of Bottles Inc. (Bottles). At the time, there were no fair value differentials. In 20X7, Vines sold inventory to Bottles for $80,000. $25,000 of this remained at year end. This inventory was sold by Bottles in 20X8. Also during 20X8, Vines sold additional inventory to Bottles for $60,000 of which $30,000 remains in inventory. Vines earns a gross profit of 30% on sales of its inventory. Both companies pay income taxes at 25%. During 20X8, Bottles earned net income of $200,000. What is the amount of equity income reported by Vines in 20X8?
A. $79,400
B. $79,550
C. $80,000
D. $80,450
Chapter 7 Solutions
Advanced Accounting 14th Edition
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - How does the presence of an indirect ownership...Ch. 7 - Prob. 5QCh. 7 - In accounting for mutual ownerships, what is the...Ch. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Jones acquires Wilson, in part because the new...Ch. 7 - Prob. 13QCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Which of the following is correct for two...Ch. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 26P
Knowledge Booster
Similar questions
- Pol Corp. acquired 80% of Gas Corp. on January 1, 2020. Pol Corp. purchased inventory for P280,000 on April 1, 2020 and sold it to Gas Corp. for P380,000 on June 1, 2020. Gas Corp. still holds the inventory at the end of the year, and determines that its market value is P328,000 at that time. Gas Corp. writes the inventory down from P380,000 to P328,000 on December 31, 2020. What amount of inventory should be eliminated in the consolidated working paper for 2020?* a. P 48,000 b. P 56,000 c. P 60,000 d. P 52,000 thanks for answering!arrow_forwardOn April 1, 2021, BBC Co. acquired a 30% stake in LTI Inc. for $ 100,000. This amount includes $ 40,000 that represents the excess of the fair market value over the book value of the identifiable net assets that LTI Inc. had on its books as of that date. Of this difference of $ 40,000, BBC attributes that $ 15,000 is due to inventory that was sold in its entirety during 2021, and the remaining $ 25,000 is due to goodwill. On the other hand, LTI generated a net income of $ 20,000 for 2021, and paid dividends of $ 2,500 for each quarter. As a consequence of these effects on LTI's books and financial statements, BBC will recognize investment income (or loss) for a. $4,500 b. $1,125 c. $3,450 d. ($10,500)arrow_forwardAt the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $45 million. At the time of purchase, the carrying value of Sky Tech's net assets was $75 million. The fair value of Sky Tech's depreciable assets was $15 million in excess of their book value. For this year, Sky Tech reported a net income of $75 million and declared and paid $15 million in dividends.The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:arrow_forward
- BB Inc., acquired a 60 percent interest in HH Company several years ago. During 20x7, HH sold inventory costing P75,000 to BB for P100,000. A total of 16 percent of this inventory was not sold to outsiders until 20x8. During 20x8, HH sold inventory costing P96,000 to BB for P120,000. A total of 35 percent of this inventory was not sold to outsiders until 20x9. In 20x8, BG reported cost of goods sold of P380, 000 while HH reported P210.000. What is the consolidated cost of goods sold in 20x8?arrow_forwardSeveral years ago, Quarantine Company purchased 80% interest of Lockdown Company for an amount equal to the fair value of Lockdown’s net assets. On March 9, 2022, Quarantine sold inventory to Lockdown for P150,000 of which P50,000 was unsold as of December 31, 2022. The beginning inventory of Lockdown includes P30,000 worth of merchandise purchased from Quarantine. For the year ended December 31, 2022, Quarantine reported profit of P200,000 and paid dividends of P60,000. Lockdown has a net income and dividends paid of P90,000, and P45,000, respectively for 2022. Quarantine sells merchandise at a profit rate of 25% based on cost, while Lockdown has a profit rate of 30% based on cost. Compute the consolidated net income.arrow_forwardstan Itd sold inventories during the current period to its wholly owned susidiary. marcia Itd for $45000. These items previously cost stan Itd $37500. Marcia Itd subsequently sold half the items to an external entity for $27500. The remainder of the inventory was sold outside the group the following year. The tax Rate is 30%. required prepare the consolidation journal entries for the current and following yeararrow_forward
- At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $51 million. At the time of purchase, the carrying value of Sky Tech's net assets was $80 million. The fair value of Sky Tech's depreciable assets was $20 million in excess of their book value. For this year, Sky Tech reported a net income of $80 million and declared and paid $20 million in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is: Multiple Choice O $6.0 million. $20 million. $30 million. None of these answer choices are correct.arrow_forwardPaggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway's net assets were equal. The two companies report the following information for 2014 and 2015. During 2014, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2014, 30% of the inventory was unsold. In 2015, the remaining inventory was resold outside the consolidated entity. 2014 Selected Data: Paggle Spillway Sales Revenue $600,000 $320,000 Cost of Goods Sold 320,000 155,000 Other Expenses 100,000 89,000 Net Income $180,000 $76,000 Dividends Paid 19,000…arrow_forwardPaggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway's net assets were equal. The two companies report the following information for 2014 and 2015. During 2014, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2014, 30% of the inventory was unsold. In 2015, the remaining inventory was resold outside the consolidated entity. 2014 Selected Data: Paggle Spillway Sales Revenue $600,000 $320,000 Cost of Goods Sold 320,000 155,000 Other Expenses 100,000 89,000 Net Income $180,000 $76,000 Dividends Paid 19,000 0…arrow_forward
- Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway's net assets were equal. The two companies report the following information for 2014 and 2015. During 2014, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2014, 30% of the inventory was unsold. In 2015, the remaining inventory was resold outside the consolidated entity. 2014 Selected Data: Paggle Spillway Sales Revenue $600,000 $320,000 Cost of Goods Sold 320,000 155,000 Other Expenses 100,000 89,000 Net Income $180,000 $76,000 Dividends Paid 19,000…arrow_forwardRommel, Inc. acquired a 60% interest in Mikee Company several years ago. During 2020, Mikee sold inventory costing P75,000 to Rommel for P100,000. A total of 16% of this inventory was not sold to outsider until 2021. During 2021, Mikee sold inventory costing P96,000 to Rommel for P120,000. A total of 35% of this inventory was not sold to outsiders until 2022. In 2021, Rommel reported cost of sales of P380,000 while Mikee reported P210,000. What is the consolidated cost of sales?a. 522,400b. 474,400c. 473,400d. 594,400arrow_forwardLorn Corporation purchased inventory from Dresser Corporation for P120,000 on September 20, 20x2, and resold 80% of the purchased inventory to unaffiliated companies prior to December 31, 20x2, for P140,000. Dresser produced the inventory sold to Lorn for P75,000. Lorn owns 70% of Dresser’s voting common stock. The companies had no other transactions during 20x2. What amount of cost of goods sold will be reported in the 20x2 consolidated income statement? A. P60,000 C. P96, 000B. P75, 000 D. P120, 000 E. P171, 000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education