Question
In: Accounting
A subsidiary made sales of inventory to its parent at a profitthis year. The parent,...
A subsidiary made sales of inventory to its parent at a profit this year. The parent, in turn, sold all but 20 percent of the inventory to unaffiliated companies, recognizing a profit. The amount that should be reported as cost of goods sold in the consolidated income statement prepared for the year should be:
A. the amount reported as intercompany sales by the subsidiary.
B. the amount reported as intercompany sales by the subsidiary minus unrealized profit in the ending inventory of the parent.
C. the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of the parent.
D. the amount reported as cost of goods sold by the parent.
Solutions
Expert Solution
The amount that should be reported as cost of goods sold in the consolidated income statement prepared for the year should be Option C, i.e. the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of the parent. The reason is that In consolidated statement cost of good sold is of the parent company less unrealised profit on closing stock of parent.
ekkarill92 answered 1 year agoRelated Solutions
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The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
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Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary.
The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
interest in December 31 of each year. On January 1, 2015, the
subsidiary acquired 40 percent of the bonds for $386,000. Both
companies use straight-line amortization.
In...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary.
The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
interest in December 31 of each year. On January 1, 2015, the
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(excluding $900,000
earnings from
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Net income of
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USE YOUR OWN WORDS
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Date
Units Purchased/(Sold)
Cost Per Unit
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5,000
$4.25
5,000
April 10
2,000
$4.00
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10,000
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