Solutions to Inter-entity asset Transaction (Ch 5 and Ch 6)

Solutions to Inter-entity asset Transaction (Ch 5 and Ch 6)...

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

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Ch 5 and Ch 6: Intra-entity transaction ACCT 501, SP 12 1 1. 1) Example 1: intra-entity Transfers of Inventory (Downstream sale) (you may want to review example 5 in Ch 1) Pepper acquires 80% of Salt on January 1, 2010 and uses the equity method to account for its investment in Salt. Assume Pepper sells merchandise costing $1 million to Salt during 2010. Peppers markup is 50% of cost. Salts 2010 ending inventory includes $900,000 purchased from Pepper. The $900,000 ending inventory is resold to an outside party in 2011. Salts markup is 20% of cost. Required: Prepare Peppers 2010 and 2011 consolidation entries required by the intra-entity inventory transfer. 2010: To eliminate intra-entity merchandise sales and purchases: Solution: (TI) Sales 2010: 1,500,000 Cost of goods sold 1,500,000 To eliminate unconfirmed profit from Salt's ending inventory and reverse inventory write-up: (G) Cost of goods sold 300,000 Inventory 300,000 2011: 2011: (*G) Equity in Salts earnings 300,000 Cost of goods sold 300,000 Ch 5 and Ch 6: Intra-entity transaction ACCT 501, SP 12 2 2. Example 2: intra-entity Transfers of Inventory (Upstream sale) (you may want to review Example 6 in Ch 1) Pepper acquires 80% of Salt on January 1, 2010 and uses the equity method to account for its investment in Salt. Assume Salt sells merchandise costing $1 million to Pepper during 2010. Salts markup is 50% of cost. Peppers 2010 ending inventory includes $900,000 purchased from Salt. The $900,000 ending inventory is resold to an outside party in 2011. Peppers markup is 20% of cost. Required: 2010: To eliminate intra-entity merchandise sales and purchases: Prepare Peppers 2010 and 2011 consolidation entries required by the intra-entity inventory transfer. (TI) Sales 2010: 1,500,000 Cost of goods sold 1,500,000 To eliminate unconfirmed profit from Salt's ending inventory and reverse inventory write-up (G) Cost of goods sold 300,000 Inventory 300,000 2011: To eliminate unconfirmed profit from beginning inventory: (*G) Retained earnings, beginning - Salt 300,000 Cost of goods sold 300,000 Ch 5 and Ch 6: Intra-entity transaction ACCT 501, SP 12 3 1) Example 3: intra-entity Land Transfer (Downstream sale) Pepper acquires 80% of Salt on January 1, 2010 and uses the equity method to account for its investment in Salt. In 2010, Pepper sells land costing $2,000,000 to Salt for $2,300,000. Salt still holds the land at the end of 2011. still holds the land at the end of 2011....
View Full Document

Page1 / 8

Solutions to Inter-entity asset Transaction (Ch 5 and Ch 6)...

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

View Full Document Right Arrow Icon
Ask a homework question - tutors are online