Question

In: Accounting

ParCorp owns 90 percent of ChiCorp. ParCorp purchased inventory from ChiCorp for $90 on August 20,...

ParCorp owns 90 percent of ChiCorp. ParCorp purchased inventory from ChiCorp for $90 on August 20, 20X8, and resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100. ChiCorp produced the inventory sold to ParCorp for $67. Provide the elimination entry for Dec 31, 20X8 consolidation.

Expert Solution

Sale Value of Inventory Sold by subsiadiary to Parent company = $90

Cost of Inventory sold by subsiadiary to Parent company = $67

Profit on Inventory sold by subsiadiary to Parent company = $90-$67 =$23

Inventory sold = 70%

Unsold Inventory % = 30%

Sale Value of Inventory Unsold = 90*30% = $27

Cost of Inventory Unsold = 67*30% = 20.1

Unrealised Profit on Inventory unsold = 27-20.1 = $6.9

Journal Entry -

Alternate 1 -Single Entry

Consolidated Proft and Loss Dr ( 6.9 *90%) .................Dr. $6.21

Minority Interest Dr ( 6.9 *10%) .....................................Dr. $0.69

To Inventory $6.21

(Being upstream profit eliminated)

or

Alternate 2 - Multiple Entry

Sales....................................Dr $27

To COGS $20.1

To Inventory $6.21

(Being upstream profit eliminated)

P&L Dr ......................................................................Dr. $6.9

COGS Dr ......................................................................Dr. $20.1

To Sales $27

Consolidated Proft and Loss Dr ( 6.9 *90%) .................Dr. $6.21

Minority Interest Dr ( 6.9 *10%) .....................................Dr. $0.69

To P&L $6.9

ekkarill92 answered 1 year ago

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