B. Woods Chapter 5 es - 1 Chapter 5 Chapter 5 Solutions to...

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1 Chapter 5 Chapter 5 Solutions to Electronic Supplement W-1 1 b Combined cost of sales - 2004 $1,070,000 Less: Intercompany purchases 2004 (120,000) Add: Unrealized inventory profit December 31, 2004 24,000 Less: Unrealized inventory profit December 31, 2003 (8,000 ) Consolidated cost of sales - 2004 $ 966,000 2 c Spud's reported net income - 2004 $150,000 Add: Unrealized profit in beginning inventory 8,000 Less: Unrealized profit in ending inventory (24,000 ) Spud's realized income 134,000 Minority interest percentage 10% Minority interest expense $ 13,400 3 d Combined separate incomes $380,000 Add: Unrealized profit in beginning inventory 8,000 Less: Unrealized profit in ending inventory (24,000) Less: Minority interest expense (13,400 ) Consolidated net income $350,600 Alternative solution: Peake's reported income $365,000 Add: Unrealized profit - beginning inventory ($8,000 x 90%) 7,200 Less: Unrealized profit - ending inventory ($24,000 x 90%) (21,600 ) Pear's net income and consolidated net income $350,600 Consolidated income statement check: 2003 2004 Consolidated sales $1,420,000 $1,780,000 Cost of sales (828,000) (966,000) Expenses (300,000) (450,000) Minority interest expense (9,200 ) (13,400 )
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2 Intercompany Profit Transactions - Inventories Consolidated net income $ 282,800 $ 350,600
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3 Chapter 5 Solution W-2 1a Investment income from Sneeze 2008 2007 Share of Sneeze's reported income $ 70,000 $ 65,000 Unrealized profit in Sneeze's December 31, 2007 inventory ($180,000 - $130,000) x 40% 20,000 (20,000) Unrealized profit in Sneeze's December 31, 2008 inventory ($210,000 - $150,000) x 63/210 (18,000 ) Income from Sneeze $ 72,000 $ 45,000 1b Consolidated net income 2008 2007 Pepper's separate income $ 90,000 $175,000 Add: Income from Sneeze 72,000 45,000 Consolidated net income $162,000 $220,000 2 Entry to correct Pepper's books at December 31, 2008 Retained earnings $20,000 Income from Sneeze $ 2,000 Investment in Sneeze 18,000 To reduce the investment in Sneeze account for unrealized profit in Sneeze's December 31, 2008 inventory, to correct income from Sneeze for the net decrease in the unrealized profit for 2008, and to charge retained earnings (prior period adjustment) for the unrealized profit in Sneeze's December 31, 2007 inventory.
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4 Intercompany Profit Transactions - Inventories Solution W-3 Pearl Corporation and Subsidiary Consolidated Income Statement for the year ended December 31, 2003 Sales ($300,000 + $100,000 - $12,000 intercompany sales)
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B. Woods Chapter 5 es - 1 Chapter 5 Chapter 5 Solutions to...

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