ch05_hw - Chapter 5 109 Chapter 5 INTERCOMPANY PROFIT...

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Chapter 5 109 Chapter 5 INTERCOMPANY PROFIT TRANSACTIONS — INVENTORIES SOLUTIONS TO EXERCISES Solution E5-1 1 a 5 c 2 d 6 a 3 a 7 a 4 c 8 c Solution E5-2 [AICPA adapted] 1 a 2 c Unrealized profits from intercompany sales with Kent are eliminated from the ending inventory: $320,000 combined current assets less $12,000 unrealized profit ($60,000 × 20%). 3 c Combined cost of sales of $750,000 less $250,000 intercompany sales Solution 5-3 1 d Philly's separate income $1,000,000 Add: Share of Silvio's income ($500,000 × 100%) 500,000 Add: Realization of profit deferred in 2006 $1,500,000 - ($1,500,000/150%) 500,000 Less: Unrealized profit in 2007 inventory $1,200,000 - ($1,200,000/150%) (400,000 ) Consolidated net income $1,600,000 2 d Combined sales $1,400,000 Less: Intercompany sales (50,000 ) Consolidated sales $1,350,000 3 c Combined cost of sales $ 680,000 Less: Intercompany purchases (50,000) 109
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110 Intercompany Profit Transactions — Inventories Less: Unrealized profit in beginning inventory (4,000) Add: Unrealized profit in ending inventory 10,000 Consolidated cost of sales $ 636,000 110
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Chapter 5 111 Solution E5-4 1 b Pride's share of Sedita's income ($60,000 × 80%) $ 48,000 Less: Unrealized profit in ending inventory ($20,000 × 50% unsold × 80% owned) (8,000 ) Income from Sedita $ 40,000 2 d Combined cost of sales $ 450,000 Less: Intercompany sales (100,000) Add: Unrealized profit in ending inventory 10,000 Consolidated cost of sales $ 360,000 3 b Reported income of Sedita $ 60,000 Unrealized profit (10,000 ) Sedita's realized income 50,000 Noncontrolling interest percentage 20 % Noncontrolling interest expense $ 10,000 Solution E5-5 1 c Combined sales $1,800,000 Less: Intercompany sales (400,000 ) Consolidated sales $1,400,000 2 c Unrealized profit in beginning inventory $100,000 - ($100,000/125%) $ 20,000 Unrealized profit in ending inventory $125,000 - ($125,000/125%) $ 25,000 3 b Combined cost of goods sold $1,440,000 Less: Intercompany sales (400,000) 111
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112 Intercompany Profit Transactions — Inventories Less: Unrealized profit in beginning inventory $100,000 - ($100,000/125%) (20,000) Add: Unrealized profit in ending inventory $125,000 - ($125,000/125%) 25,000 Consolidated cost of goods sold $1,045,000 112
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Chapter 5 113 Solution E5-6 1 a Patti's separate income $200,000 Add: Income from Susan: Share of Susan's reported income ($200,000 × 70%) 140,000 Less: Patents amortization (20,000) Add: Unrealized profit in beginning inventory [$112,500 - ($112,500/150%)] × 70% 26,250 Less: Unrealized profit in ending inventory [$33,000 - ($33,000/150%)] × 70%
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This homework help was uploaded on 04/05/2008 for the course ACCT 401 taught by Professor Schoderbek during the Spring '08 term at Rutgers.

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ch05_hw - Chapter 5 109 Chapter 5 INTERCOMPANY PROFIT...

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