Question

In: Accounting

ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs...

ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. 10. Required information Based on the information given above, what amount of cost of goods sold did ABC record in 20X8? $2,765,000 $1,620,000 $1,422,000 $2,963,000 11. Required information Based on the information given above, what amount of cost of goods sold did XYZ record in 20X8? $2,765,000 $1,620,000 $1,422,000 $2,963,000 12. Required information Based on the information given above, what amount of cost of goods sold must be reported in the consolidated income statement for 20X8? $2,765,000 $1,620,000 $1,422,000 $2,963,000 13. Required information Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8? $2,765,000 $1,620,000 $1,422,000 $2,963,000 14. Required information Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X9? $187,000 $221,000 $1,422,000 $2,963,000

Expert Solution

Answer:-

Given ABC Corp owns 75% stake in XYZ corp.

Then

Parent company = ABC corp

Subsidiary company = XYZ corp.

ABC sold 35,000 chairs costing $79 each to XYZ at $90 each.

# SELLING PRICE OF ABC BECOMES COST PRICE OF XYZ.

(11) Given, XYZ sold 18,000 units to unaffiliated company in the year ending 31/12/18

Cost of goods sold to XYZ = no.of units × cost price of each chair.

= 18,000 × $90

= $16,20,000.

(12) Amount of cost of goods sold to be recorded in consolidated financial statement in the year ending 31/12/18.

#no place for notional profits or inter company profits.

Cost of goods sold = units sold to external profit × cost at origin.

= 18,000 units × $ 79

= $ 14,22,000.

(Or)

Cost of goods sold for xyz = 18,000×$90 = $ 16,20,000

Less:- notional profit = 18,000×($90-$79) = $ 198,000

= 16,20,000 - 198,000

= $ 14,22,000.

(13) Portion of cost of goods sold to be eliminated from consolidated income statement.

Cost of goods sold for ABC = $27,65,000

Cost of goods sold for XYZ = $16,20,000

Less:-

Cost of goods sold to be shown in consolidated income statement =( $ 14,22,000)

Cost to be eliminated = $ 27,65,000 + $ 16,22,000 - $ 14,22,000.

= $ 43,87,000 - $ 14,22,000

= $ 29,63,000.

(14) Portion of cost of goods sold to be eliminated in 2019.

Cost of goods sold for xyz(subsidiary) = $ 15,30,000 ( 17,000 × $90)

Less:- cost of goods sold for ABC(parent) = $ 13,43,000 (17,000 × $ 79)

= $ 15,30,000 - $ 13,43,000

# Cost of goods to be eliminated in 2019 = $ 187,0

ekkarill92 answered 5 months ago

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