Question

In: Accounting

A parent and its subsidiary began engaging in intercompany merchandise sales this year. Total retail value...

A parent and its subsidiary began engaging in intercompany merchandise sales this year. Total retail value of upstream sales for the year were $65,000; the retail value of downstream sales was $25,000. The subsidiary sells to the parent at a markup of 35% on cost; the parent sells to the subsidiary at a markup of 30% on sales price. Upstream sales of $13,500 remain in the parent’s ending inventory. Downstream sales of $6,000 remain in the subsidiary’s ending inventory.

Required

a.         Calculate the unconfirmed profit in the parent’s ending inventory and in the subsidiary’s ending inventory.

b.         Prepare the working paper eliminating entries (I) for the intercompany inventory transactions, required to consolidate the trial balances of the parent and its subsidiary for the year.

           

Solutions

Expert Solution


Related Solutions

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...
Consider the intercompany transfer of inventory between a parent and a subsidiary. Some say that intercompany...
Consider the intercompany transfer of inventory between a parent and a subsidiary. Some say that intercompany transfers can be a source of significant corporate risk. Why is that? Are there any internal controls you can think of that would minimize this risk? USE YOUR OWN WORDS
During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation...
During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation (a 90%-owned subsidiary) for a price of $32,340, at a markup of 32% of cost. Subsidiary sold merchandise acquired from Parent to outsider customers for $38,500 during 2019. Included in Subsidiary’s January 1, 2019, inventories were goods acquired from Parent at a billed price of $3,036 and included in Subsidiary’s December 31, 2019, inventories were goods acquired from Parent at a billed price of...
During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation...
During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation (a 90%-owned subsidiary) for a price of $32,340, at a markup of 32% of cost. Subsidiary sold merchandise acquired from Parent to outsider customers for $38,500 during 2019. Included in Subsidiary’s January 1, 2019, inventories were goods acquired from Parent at a billed price of $3,036 and included in Subsidiary’s December 31, 2019, inventories were goods acquired from Parent at a billed price of...
Downstream Intercompany Merchandise Transactions Sketchy Shoes is a subsidiary of Pacific Brands. Pacific routinely sells merchandise...
Downstream Intercompany Merchandise Transactions Sketchy Shoes is a subsidiary of Pacific Brands. Pacific routinely sells merchandise to Sketchy at a 25% markup on cost. Information on intercompany merchandise transactions is below (in thousands): Inventory balance on Sketchy’s books, purchased from Pacific Brands, January 1, 2017 $ 6,250 Inventory balance on Sketchy’s books, purchased from Pacific Brands, December 31, 2017 6,625 Total sales revenue recorded by Pacific Brands on merchandise sales to Sketchy in 2017 250,000 Required a. Prepare the working...
19. Parent Corporation sells land (a capital asset) to Subsidiary Corporation in an intercompany transaction, realizing...
19. Parent Corporation sells land (a capital asset) to Subsidiary Corporation in an intercompany transaction, realizing a $25,000 gain. Subsidiary uses the land for five years in its trade or business before selling the land to a nonmember of the group in a cash sale in which a $50,000 gain is realized. Which statement is correct? A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation. A $50,000 Sec. 1231 gain is...
6. Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following...
6. Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year:                                                                                             Cost                    Retail Beginning inventory                              $ 60,000               $ 90,000 Purchases                                                 380,000                 520,000 Freight-in                                                     5,000                       —   Net markups                                                   —                      17,000 Net markdowns                                              —                      20,000 Sales revenue                                                 —                    410,000 What is the cost of ending inventory using the conventional method?
A parent provides marketing services to its subsidiary during 2017. The parent charged the subsidiary $500,000...
A parent provides marketing services to its subsidiary during 2017. The parent charged the subsidiary $500,000 for the services. The services cost the parent $400,000 (paid in cash). The companies use service revenue and service expense, as appropriate, to record this transaction and all intercompany charges were still unpaid as of the end of the year. Provide the 2017 entries needed to record both the original transactions and the eliminations necessary for consolidation. Provide entries for Parent, Subsidiary, and the...
Upstream Intercompany Merchandise Transactions Jimmitz Inc. is a subsidiary of Krocker Gear. Jimmitz sells shoe accessories...
Upstream Intercompany Merchandise Transactions Jimmitz Inc. is a subsidiary of Krocker Gear. Jimmitz sells shoe accessories to Krocker at a 25% markup on cost. Information on these intercompany merchandise transactions is below: Inventory balance on Krocker’s books, purchased from Jimmitz, January 1, 2020 $11,250 Inventory balance on Krocker’s books, purchased from Jimmitz, December 31, 2020 10,250 Total sales revenue recorded by Jimmitz on merchandise sales to Krocker in 2020 1,500,000 Required a. Prepare the working paper eliminating entries related to...
assume the parent company acquires its subsidiary by exchanging 50000 shares of its $1 par value...
assume the parent company acquires its subsidiary by exchanging 50000 shares of its $1 par value common stock, with a fair value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an among equaling their book values except for an unrecorded trademark with a fair value of $120,000, an unrecorded video library valued...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT