Practice 5- Ch 5 and Ch 6 Inter-entity transactions

# Practice 5- Ch 5 and Ch 6 Inter-entity transactions - Ch 5...

This preview shows pages 1–4. Sign up to view the full content.

1 Ch 5 and Ch 6 Inter-entity transactions Four Practice Problems: 5-20, 5-25, 5-34 and Ch 6 Excel case. Solutions: a. Consolidated Cost of Goods Sold Problem 1: 5-20 (30 Minutes) (Compute selected balances based on three different intra-entity asset transfer scenarios) Penguin’s cost of goods sold . ..................................................... \$290,000 Snow’s cost of goods sold . ......................................................... 197,000 Elimination of 2011 intra-entity transfers . .................................... (110,000) Reduction of beginning Inventory because of 2010 unrealized gross profit (\$28,000 ÷ 1.4 = \$20,000 cost; \$28,000 transfer price less \$20,000 cost = \$8,000 unrealized gross profit) . ................................... (8,000) Reduction of ending inventory because of 2011 unrealized gross profit (\$42,000 ÷ 1.4 = \$30,000 cost; \$42,000 transfer price less \$30,000 cost = \$12,000 unrealized gross profit) . ................................. Consolidated cost of goods sold . ..................................... \$381,000 12,000 Consolidated Inventory Penguin book value . .............................................................. \$346,000 Snow book value . .................................................................. 110,000 Defer ending unrealized gross profit (see above) . ................. (12,000 Consolidated Inventory . ......................................................... \$444,000 )

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 Noncontrolling Interest in Subsidiary’s Net Income Because all intra-entity sales were downstream, the deferrals do not affect Snow. Thus, the noncontrolling interest is 20% of the \$58,000 (revenues minus cost of goods sold and expenses) reported income or \$11,600. b. Consolidated Cost of Goods Sold Penguin book value . ................................................................... \$290,000 Snow book value . ........................................................................ 197,000 Elimination of 2011 intra-entity transfers . .................................... (80,000) Reduction of beginning inventory because of 2010 unrealized gross profit (\$21,000 ÷ 1.4 = \$15,000 cost; \$21,000 transfer price less \$15,000 cost = \$6,000 unrealized gross profit) . ................................... (6,000) Reduction of ending inventory because of 2011 unrealized gross profit (\$35,000 ÷ 1.4 = \$25,000 cost; \$35,000 transfer price less \$25,000 cost = \$10,000 unrealized gross profit) . ................................. Consolidated cost of goods sold . ................................................ \$411,000 10,000
3 20. b. (continued) Consolidated Inventory Penguin book value . ......................................................................................... \$346,000 Snow book value . ............................................................................................. 110,000 Defer ending unrealized gross profit (see above) . ............................................ (10,000 Consolidated inventory . ............................................................................. \$446,000

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 02/22/2012 for the course ACCT 501 taught by Professor Ma during the Spring '11 term at South Carolina.

### Page1 / 10

Practice 5- Ch 5 and Ch 6 Inter-entity transactions - Ch 5...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online