Chapter 06 – Intercompany Inventory Transactions
P6-21 Incomplete Data
a.
Increase in fair value of buildings and equipment:
Consolidated total
$ 680,000
Balance reported by Lever
(400,000)
Balance reported by Tropic
(240,000)
Increase in value
$ 40,000
b.
Accumulated depreciation for consolidated entity:
Accumulated depreciation reported by Lever
$180,000
Accumulated depreciation reported by Tropic
110,000
Cumulative write-off of differential
($5,000 x 6 years)
30,000
Accumulated depreciation for consolidated entity
$320,000
c.
Amount paid by Lever to acquire ownership in Tropic:
Common stock outstanding
$ 60,000
Retained earnings at acquisition
30,000
Total book value at acquisition
$ 90,000
Increase in value of buildings and equipment
40,000
Fair value of net assets acquired
$130,000
Proportion of ownership acquired
x 0.75
Amount paid by Lever
$ 97,500
d.
Investment in Tropic Company stock reported at December 31, 20X6:
Tropic’s common stock outstanding December 31, 20X6
$ 60,000
Tropic’s retained earnings reported December 31, 20X6
112,000
Total book value
$172,000
Proportion of ownership held by Lever
x 0.75
Lever’s share of net book value
$129,000
Unamortized differential ($5,000 x 2 years) x 0.75
7,500
20X6 Gross Profit Deferral on Upstream Sale *
(3,000)
Investment in Tropic Company stock
$133,500
* See part f. for Unrealized inventory profit calculation. Total
unrealized is $4,000 and Lever owns 75% of Tropic so the total
gross profit deferral in the investment account would be $3,000
($4,000 X 75%).
e.
Intercorporate sales of inventory in 20X6:
Sales reported by Lever
$420,000
Sales reported by Tropic
260,000
Total sales
$680,000
Sales reported in consolidated income statement
(650,000)
Intercompany sales during 20X6
$ 30,000
Chapter 06 – Intercompany Inventory Transactions
