ACT4491 CH04 Exercises

ACT4491 CH04 Exercises - During 20x1, Company P sold 40,000...

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Unformatted text preview: During 20x1, Company P sold 40,000 of goods to subsidiary Company S at a profit of 10,000. One-fourth of the goods remain unsold at year-end. If there were no adjustments made on the consolidated workpaper, what would be incorrect on the Consolidated income statement and balance sheet? Income Statement Sales Overstated 40,000 Cost of goods sold Overstated 40,000 Cost of goods sold Understated 2,500 (1/4 x 10,000) Balance Sheet Inventory Overstated 2,500 (1/4 x 10,000) Issues 1 Issues 2 Debit Sales and credit Cost of Goods Sold $40,000. Debit Cost of Goods Sold and credit Inventory $2,500 (1/4 × $10,000). Issues 3 20X1 20X2 NCI $ $ 400 ($2,000 × 20%) Controlling Interest 5,600 [$4,000 + ($2,000 × 80%)] Total profit $ $ 6,000 Issues 4 Company S has realized a $50,000 profit; however, it is not immediate. The profit will be realized over the 5-year life of the asset. Company S will realize the profit by reducing consolidated depreciation expense by $10,000 ($50,000 ÷ 5 years) each year for 5 years. NCI will realize $2,000 (20% × $10,000) each year. EXERCISE 4-1 Painter Company and Subsidiary Solvent Company Consolidated Income Statement For the Year Ended December 31, 20X1 Sales ($250,000 + $500,000 – $100,000) ........................................................ $650,000 Cost of goods sold [$150,000 + $310,000 – $100,000 + (40% × $20,000)] ...... 368,000 Gross profit ...................................................................................................... $282,000 Expenses ($45,000 + $120,000) ...................................................................... 165,000 Consolidated net income.................................................................................. Consolidated net income....
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This note was uploaded on 03/02/2011 for the course ACT 4491 taught by Professor Magrath during the Spring '11 term at Troy.

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ACT4491 CH04 Exercises - During 20x1, Company P sold 40,000...

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