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Chapter 7 Homework Solutions part 1

Chapter 7 Homework Solutions part 1 - 1 2 3 4 5 6 E7-1 a...

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E7-1 E7-2 E7-3 E7-4 E7-5 1. a b [5] c c a 2. c [1] d [6] b a d 3. a [2] b c [9] e [10] a 4. c [2] c [6] a 5. c [3] b [7] 6. c b [8] [1] - Since all of the inventory sold through, Parker's CoGS is consolidated CoGS. Eliminate Smith's CoGS for the intercompany inventory. $400,000 + $300,000 - $250,000. [2] - $40,000 x 140% = $56,000 is Twill's cost and Webb's revenue that need to be eliminated. [3] - Dean is a nonfactor in this question, as it is not consolidated or accounted for under the equity method. 1/4 of the goods from Kent are still in inventory, and so, then is 1/4 of the profit from the transaction. $320,000 - ($48,000 / 4) = $308,000. [4] - 1/4 of Banks' cost in Lamm's profit. If $60,000 of inventory is left at the end of the year, then total consolidated inventory is: 175,000 Banks 250,000 Lamm 45,000 Banks from Lamm ($60,000 x (1 - 1/4)) 470,000 [5] - As discussed in class, some really unfortunate wording here. $500,000 is the sale price; Small's cost, not Park's. Park's cost, at a 60% margin, is $200,000. 4/5 of the goods have sold through, so the consolidated entity's cost of goods sold should be $200,000 x 4/5 = $160,000. 800,000 Park's total cost of goods sold (40,000) Park's excess for intercompant goods still in inventory 700,000 Small's total cost of goods sold (400,000) Small's recorded cost of goods sold for intercompany goods ($500,000 x 4/5) 1,060,000 As I mentioned in class, my original file crashed. Below are E7-11, 12, and 13, which were not on the handout I passed out in class.
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