Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie [NB1] made...

Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie [NB1] made several sales of inventory to McCready. The cost and sales price of the goods were $150,000 and $220,000, respectively. McCready still owned one-fourth of the goods at the end of 2021. Consolidated cost of goods sold for 2021 was $2,280,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in McCready’s ending inventory.How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from McCready to Kenzie?

            A)    Consolidated cost of goods sold would have remained $2,280,000.
            B)    Consolidated cost of goods sold would have been more than $2,280,000 because of the controlling interest in the subsidiary.
            C)    Consolidated cost of goods sold would have been less than $2,280,000 because of the noncontrolling interest in the subsidiary.
            D)    Consolidated cost of goods sold would have been more than $2,280,000 because of the noncontrolling interest in the subsidiary.
            E)    The effect on consolidated cost of goods sold cannot be predicted from the information provided.

Answer: $2,280,000 COGS is unaffected by intra-entity gross profits in Consolidated Ending Inventory value

Kindly explain.

Expert Solution

ekkarill92 answered 2 years ago

Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods...

Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods to Mullen for $2,500,000 that cost Poole $1,850,000. Mullen still owned 30% of the goods at the end of the year. Cost of goods sold was $11,200,000 for Poole and $6,600,000 for Mullen. What was consolidated cost of goods sold? Multiple Choice $15,105,000. $15,300,000. $15,495,000. $17,800,000.

On January 1, 2021, Waddington Company acquired Middleton Co. by issuing 55,000 shares of its common...

On January 1, 2021, Waddington Company acquired Middleton Co. by issuing 55,000 shares of its common Stock with a market value of $20 per share. A building on sub’s books was undervalued by $100,000, resulting in annual amortization of $10,000. Also, there was an unrecorded customer list valued at $150,000, resulting in annual amortization of $15,000; as well as a 10-year franchise agreement valued at $125,000. The separate 2021 financial statements for Waddington and Middleton follow. Waddington Middleton Sales revenue...

Sunland, Inc. acquired 40% of Cheyenne Corporation's voting stock on January 1, 2021 for $900000. During...

Sunland, Inc. acquired 40% of Cheyenne Corporation's voting stock on January 1, 2021 for $900000. During 2021, Cheyenne earned $361000 and paid dividends of $244000. Sunland's 40% interest in Cheyenne gives Sunland the ability to exercise significant influence over Cheyenne's operating and financial policies. During 2022, Cheyenne earned $530000 and paid cash dividends of $166000 on April 1 and $166000 on October 1. On July 1, 2022, Sunland sold half of its stock in Cheyenne for $627000 cash. What should...

Wildhorse, Inc. acquired 30% of Ayayai Corporation's voting stock on January 1, 2021 for $990000. During...

Wildhorse, Inc. acquired 30% of Ayayai Corporation's voting stock on January 1, 2021 for $990000. During 2021, Ayayai earned $364000 and paid dividends of $232000. Wildhorse's 30% interest in Ayayai gives Wildhorse the ability to exercise significant influence over Ayayai's operating and financial policies. During 2022, Ayayai earned $479000 and paid cash dividends of $166000 on April 1 and $166000 on October 1. On July 1, 2022, Wildhorse sold half of its stock in Ayayai for $663000 cash. What should...

Player Company acquired 70 percent ownership of Scout Company’s voting shares on January 1, 20X2. During...

Player Company acquired 70 percent ownership of Scout Company’s voting shares on January 1, 20X2. During 20X5, Player purchased inventory for $29,000 and sold the full amount to Scout Company for $39,000. On December 31, 20X5, Scout’s ending inventory included $7,800 of items purchased from Player. Also in 20X5, Scout purchased inventory for $52,000 and sold the units to Player for $82,000. Player included $20,500 of its purchase from Scout in ending inventory on December 31, 20X5. Summary income statement...

On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange...

On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $767,200 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $328,800 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $138,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is...

2. On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At...

2. On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December 31, Tamlee Co. declared and paid a cash dividend of $50,000 and reported a net income of $160,000. REQUIRED: Prepare the journal entries for the Criquet Co. under each of the independent circumstances: a. Criquet Co. acquires a 10% interest in the Tamlee Co. b. Criquet Co. acquires a 25% interest in the Tamlee Co.

On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December...

On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December 31, Tamlee Co. declared and paid a cash dividend of $50,000 and reported a net income of $160,000. REQUIRED: Prepare the journal entries for the Criquet Co. under each of the independent circumstances: a. Criquet Co. acquires a 10% interest in the Tamlee Co. b. Criquet Co. acquires a 25% interest in the Tamlee Co.

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As...

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/22) 180,000 Retained earnings, 1/1/20 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000...

On January 1, 2015, Pack Co. acquired 80% of the common stock of Sack Co. by...

On January 1, 2015, Pack Co. acquired 80% of the common stock of Sack Co. by paying $80,000. On that date Sack' land was undervalued $3,800 and its Buildings (7 yr life) were undervalued $4,200 and its equipment (5 Yr life) were undervalued $2,000. A. Show the elements making of the cost of the investment. (Hint: Set up a schedule showing the controlling and non-controlling interest in the individual elements) B. Prepare consolidation entry S to eliminate the sub’s equity...

Question