Chapter 06 – Intercompany Inventory Transactions
6.
b –
14 years = ($28,000 / [(28,000 – $20,000) / 4 years]
E6-3 Multiple Choice – Consolidated Income Statement
1.
c –
The only sales recorded are sales to non-affiliates.
2.
b –
The amount of cost of goods sold is the cost at
which Blue had produced the inventory.
3.
c –
Total income ($86,000 – $47,000)
$39,000
Income assigned to noncontrolling
interest [0.40($86,000 – $60,000)]
(10,400)
Consolidated net income assigned
to controlling interest
$28,600
E6-4 Multiple-Choice Questions — Consolidated Balances
1.
c –
The only sales recorded are sales to non-affiliates.
2.
a –
Amount paid by Lorn Corporation
$120,000
Unrealized profit
(45,000)
Actual cost
$ 75,000
Portion sold
x 0.80
Cost of goods sold
$ 60,000
3.
e –
Consolidated sales
$140,000
Cost of goods sold
(60,000)
Consolidated net income
$ 80,000
Income to Dresser’s noncontrolling
interest:
Sales
$120,000
Reported cost of sales
(75,000)
Report income
$ 45,000
Portion realized
x 0.80
Realized net income
$ 36,000
Portion to Noncontrolling
Interest
x 0.30
Income to noncontrolling
Interest
(10,800)
Income to controlling interest
$ 69,200
4.
a –
Inventory reported by Lorn
$ 24,000
Unrealized profit ($45,000 x .20)
(9,000)
Ending inventory reported
$ 15,000
E6-5 Multiple-Choice Questions — Consolidated Income Statement
1.
a –
$20,000 = $30,000 x [($48,000 – $16,000) / $48,000]
2.
d –
Sales reported by Movie Productions Inc.
$67,000
Cost of goods sold ($30,000 x 2/3)
(20,000)
Consolidated net income
$47,000
3.
a –
$7,000 = [($67,000 – $32,000) x 0.20]
Chapter 06 – Intercompany Inventory Transactions
The basic entry (not shown) would be adjusted by 65,000 of deferred
E6-12 (continued)
a.
Consolidated net income for 20X4:
Operating income of Hollow Corporation
$160,000
Net income of Surg Corporation
90,000
$250,000
Less: Unrealized profit — Surg Corporation
(15,000)
Consolidated net income
$235,000
b.
Inventory balance, December 31, 20X5:
Inventory reported by Hollow Corporation
$ 30,000
Unrealized profit on books of Surg
Corporation
($135,000 – $90,000) x ($30,000/$135,000)
(10,000)
$20,000
Inventory reported by Surg Corporation
$110,000
Unrealized profit on books of Hollow
Corporation
($280,000 – $140,000) x ($110,000/$280,000)
(55,000)
55,000
Inventory, December 31, 20X5
$75,000
c.
Consolidated cost of goods sold for 20X5:
COGS on sale of inventory on hand January 1, 20X5
$45,000 x ($120,000 / $180,000)
$ 30,000
COGS on items purchased from Surg in 20X5
($135,000 – $30,000) x ($90,000 / $135,000)
70,000
COGS on items purchased from Hollow in 20X5
($280,000 – $110,000) x ($140,000 / $280,000)
85,000
Total cost of goods sold
$185,000
d.
Income assigned to controlling interest:
Operating income of Hollow Corporation
$220,000
Net income of Surg Corporation
85,000
$305,000
Add: Inventory profit of prior year realized in 20X5
15,000
Less:
Unrealized inventory profit — Surg Corporation
(10,000)
Unrealized inventory profit — Hollow Corporation
(55,000)
Income to noncontrolling interest
($85,000 + $15,000 – $10,000) x 0.30
(27,000)
Income assigned to controlling interest
$228,000