Professional Documents
Culture Documents
CHAPTER 7
INTERCOMPANY INVENTORY TRANSACTIONS
ANSWERS TO QUESTIONS
Q7-1 All inventory transfers between related companies must be eliminated to avoid an
overstatement of revenue and cost of goods sold in the consolidated income statement. In
addition, when unrealized profits exist at the end of the period, the eliminations are needed to
avoid overstating inventory and consolidated net income.
Q7-2 An inventory transfer at cost results in an overstatement of sales and cost of goods
sold. While net income is not affected, gross profit ratios and other financial statement
analysis may be substantially in error if appropriate eliminations are not made.
Q7-3 An upstream sale occurs when the parent purchases items from one or more
subsidiaries. A downstream sale occurs when the sale is made by the parent to one or more
subsidiaries. Knowledge of the direction of sale is important when there are unrealized profits
so that the person preparing the consolidation workpaper will know whether to reduce
consolidated net income assigned to the controlling interest by the full amount of the
unrealized profit (downstream) or reduce consolidated income assigned to the controlling
and noncontrolling interests on a proportionate basis (upstream).
Q7-4 As in all cases, the total amount of the unrealized profit must be eliminated in
preparing the consolidated statements. When the profits are on the parent company's books,
consolidated net income and income assigned to the controlling interest are reduced by the
full amount of the unrealized profit.
Q7-5 Consolidated net income is reduced by the full amount of the unrealized profits. In the
upstream sale, the unrealized profits are apportioned between the parent company
shareholders and the noncontrolling shareholders. Thus, consolidated net income assigned
to the controlling and noncontrolling interests is reduced by a pro rata portion of the
unrealized profits.
Q7-6 Income assigned to the noncontrolling interest is affected when unrealized profits are
recorded on the subsidiary's books as a result of an upstream sale. A downstream sale
should have no effect on the income assigned to noncontrolling interest because the profits
are on the books of the parent.
Q7-7 The basic eliminating entry needed when the item is resold before the end of the
period is:
Sales
Cost of Goods Sold
XXXXXX
XXXXXX
The debit to sales is based on the intercorporate sale price. This means that only the
revenue recorded by the company ultimately selling to the nonaffiliate is to be included in the
consolidated income statement. Cost of goods sold is credited for the amount paid by the
purchaser on the intercorporate transfer, thereby permitting the cost of goods sold recorded
by the initial owner to be reported in the consolidated statement.
7-1
Q7-8 The basic eliminating entry needed when one or more of the items are not resold
before the end of the period is:
Sales
Cost of Goods Sold
Inventory
XXXXXX
XXXXXX
XXXXXX
The debit to sales is for the full amount of the transfer price. Inventory is credited for the
unrealized profit at the end of the period and cost of goods sold is credited for the amount
charged to cost of goods sold by the company making the intercompany sale.
Q7-9 Cost of goods sold is reported by the consolidated entity when inventory is sold to an
external party. The amount reported as cost of goods sold is based on the amount paid for
the inventory when it was produced or purchased from an external party. If inventory has
been purchased by one company and sold to a related company, the cost of goods sold
recorded on the intercorporate sale must be eliminated.
Q7-10 No adjustment to retained earnings is needed if the intercorporate sales have been
made at cost or if all intercorporate sales have been resold to an external party in the same
accounting period. If not all of the intercorporate sales have been resold by the end of the
period, consolidated retained earnings must be reduced by the parent's proportionate share
of any unrealized profits.
Q7-11 A proportionate share of the realized retained earnings of the subsidiary are assigned
to the noncontrolling interest. Any unrealized profits on upstream sales are deducted
proportionately from the amount assigned to the noncontrolling interest and consolidated
retained earnings. Unrealized profits on downstream sales are deducted entirely from the
retained earnings assigned to the consolidated entity.
Q7-12 When inventory profits from a prior period intercompany transfer are realized in the
current period, the profit is added to consolidated net income and to the income assigned to
the shareholders of the company that made the intercompany sale. If the unrealized profits
arise from a downstream sale, income assigned to the controlling interest will increase by the
full amount of profit realized. When the profits arise from an upstream sale, income assigned
to the controlling and noncontrolling interests will be increased proportionately in the period
the profit is realized. Thus, knowledge of whether the profits resulted from an upstream or a
downstream sale is imperative in assigning consolidated net income to the appropriate
shareholder group.
Q7-13 Consolidated retained earnings must be reduced by the full amount of any unrealized
profit on the parent company books.
Q7-14 Consolidated retained earnings must be reduced by the parent's proportionate share
of the unrealized profit on the subsidiary's books.
Q7-15* Sales between subsidiaries are treated in the same manner as upstream sales.
Whenever the profits are on the books of one of the subsidiaries, the unrealized profits at the
end of the period are eliminated and consolidated net income and income assigned to the
controlling and noncontrolling interests is reduced.
7-2
President
Water Products Corporation
, CPA
Inventory Sale and Purchase of New Inventory
If Water Products holds only a small percent of the ownership of Plumbers Products and
Growinkle Manufacturing, it should have no difficulty in reporting the desired results. This
would not be the case if the two companies are subsidiaries of Water Products.
If both Plumbers Products and Growinkel are subsidiaries of Water Products, both the sale of
inventory to Plumbers Supply and the purchase of inventory from Growinkle Manufacturing
must be eliminated. In addition, the unrealized profit on any unsold inventory involved in
these transfers must be eliminated in preparing the financial statements for the current
period.
7-3
C7-2 (continued)
The consolidated income statement should include the same amount of income on the
inventory sold to Plumbers Supply and resold during the year as would have been recorded if
Water Products had sold the inventory directly to the purchaser. Any income recorded by
Water Products on inventory not resold by Plumbers Supply must be eliminated.
Similarly, the consolidated income statement should include the same amount of income on
the inventory purchased by Water Products and resold during the year as would have been
recorded if Growinkle Manufacturing had sold the inventory directly to the purchaser. Any
income recorded by Growinkle Manufacturing on inventory not resold by Water Products
must be eliminated.
Consolidated net income may increase if Plumbers Supply is able to sell the inventory it
purchased from Water Products at a higher price than would have been received by Water
Products or if it is able to sell a larger number of units. The same can be said for the
inventory purchased by Water Products from Growinkle Manufacturing. It is important to
recognize that the transfer of inventory between Water Products and its subsidiaries does not
in itself generate income for the consolidated entity.
An additional level of complexity may arise in this situation if Water Products uses the LIFO
inventory method. It might, for example, be forced to carry over its LIFO cost basis on the old
inventory sold to Plumbers Supply to the new inventory purchased from Growinkle
Manufacturing since it was replaced within the accounting period.
Primary citation:
ARB 51, Par. 6
7-4
Treasurer
Evert Corporation
From:
Re:
, CPA
Inventory Sale to Parent
This memo is prepared in response to your request for information on the appropriate
treatment of intercompany inventory transfers in consolidated financial statements. The
specific eliminating entries required in this case depend on the valuation assigned to the
inventory at December 31, 20X2.
Frankle Company sold inventory with a carrying value of $240,000 to Evert for $180,000 on
December 20, 20X2. Since the exchange price was well below Frankles cost, consideration
should be given to whether the inventory should be reported at $180,000 or $240,000 in the
consolidated statements at December 31, 20X2, under the lower-of-cost-or-market rule.
While the value of the inventory apparently had fallen below Frankles carrying value, the
accounting standards indicate no loss should be recognized when the evidence indicates
that cost will be recovered with an approximately normal profit margin upon sale in the
ordinary course of business. [ARB 43, Chapter 4, Par. 9]
We are told the management of Frankle considered the drop in prices to be temporary and
Evert was able to sell the inventory for $70,000 more than the original amount paid by
Frankle. It therefore seems appropriate for the consolidated entity to report the inventory at
Frankles cost of $240,000 at December 31, 20X2.
In preparing the consolidated statements at December 31, 20X2 and 20X3, the effects of the
intercompany transfer should be eliminated. [ARB 51, Par. 6]
The following eliminating entry is required at December 31, 20X2:
E(1) Sales
Inventory
Cost of Goods Sold
180,000
60,000
240,000
The above entry will increase the carrying value of the inventory to $240,000. Eliminating
sales of $180,000 and cost of goods sold of $240,000 will increase consolidated net income
by $60,000 and income assigned to the noncontrolling interest by $6,000 ($60,000 x .10).
These changes will result in an increase in consolidated retained earnings and the amount
assigned to the noncontrolling shareholders in the consolidated balance sheet by $54,000
and $6,000, respectively.
7-5
C7-3 (continued)
The following eliminating entry is required at December 31, 20X3:
E(2) Cost of Goods Sold
Retained Earnings
Noncontrolling interest
60,000
54,000
6,000
The above entry will reduce consolidated net income by $60,000 and income assigned to the
noncontrolling interest by $6,000 ($60,000 x .10). The credits to retained earnings and
noncontrolling interest are needed to bring the beginning balances into agreement with those
reported at December 31, 20X2.
No eliminations are required for balances reported at December 31, 20X3, because the
inventory has been sold to a nonaffiliate prior to year-end.
Primary citations:
ARB 43, CH 4, Par. 9
ARB 51, Par. 6
7-6
7-7
C7-5 (continued)
d. It may be necessary to start by looking at intercorporate cash receipts and disbursements
to determine the extent of intercorporate sales. One or more months might be selected and
all vouchers examined to establish the level of intercorporate sales and the profit margins
recorded on the sales. For those products sold throughout the year, it may be possible to
estimate for the year as a whole based on an examination of several months. Once total
intercompany sales and profit margins have been estimated, the amount of unrealized profit
at year end should be estimated. One approach would be to take a physical inventory of the
specific product types which have been identified and attempt to trace back using the product
identification numbers or shipping numbers to determine what portion of the inventory on
hand was purchased from affiliates.
7-8
SOLUTIONS TO EXERCISES
E7-1 Multiple-Choice Questions on Intercompany Inventory Transfers
[AICPA Adapted]
1.
2.
3.
4.
5.
6.
7-9
$48,000
x
.25
$320,000
(12,000)
$308,000
$235,000
250,000
$485,000
(15,000)
$470,000
$ 800,000
700,000
$1,500,000
(200,000)
(240,000)
$1,060,000
Note:
2.
$32,000
3.
$6,000
4.
$9,000
5.
6.
$12,000
(3,000)
$ 9,000
3.
7-10
$39,000
(10,400)
$28,600
2.
$120,000
(45,000)
$ 75,000
x
.80
$ 60,000
3.
Consolidated sales
Cost of goods sold
Consolidated net income
Income to Dressers noncontrolling
interest:
Sales
Reported cost of sales
Report income
Portion realized
Realized net income
Portion to Noncontrolling
Interest
Income to noncontrolling
Interest
Income to controlling interest
$140,000
(60,000)
$ 80,000
4.
$120,000
(75,000)
$ 45,000
x
.80
$ 36,000
x
.30
(10,800)
$ 69,200
$ 24,000
(9,000)
$ 15,000
2.
3.
7-11
$67,000
(20,000)
$47,000
b.
c.
Inventory
Cash (Accounts Payable)
960,000
(2)
750,000
(3)
600,000
960,000
750,000
600,000
Inventory
Cash (Accounts Payable)
750,000
(2)
1,125,000
(3)
750,000
750,000
1,125,000
750,000
Eliminating entry:
E(1)
Sales
Cost of Goods Sold
750,000
7-12
750,000
b.
c.
Inventory
Cash (Accounts Payable)
960,000
(2)
750,000
(3)
600,000
960,000
750,000
600,000
Inventory
Cash (Accounts Payable)
750,000
(2)
810,000
(3)
540,000
750,000
810,000
540,000
Eliminating entry:
E(1)
Sales
Cost of Goods Sold
Inventory
750,000
7-13
708,000
42,000
Karlow Corporation reported cost of goods sold of $820,000 ($82 x 10,000 desks)
and Draw Company reported cost of goods sold of $658,000 ($94 x 7,000 desks).
b.
Cost of goods sold for the consolidated entity is $574,000 ($82 x 7,000 desks).
c.
Eliminating entry:
E(1)
d.
940,000
904,000
36,000
Eliminating entry:
E(1)
e.
Sales
Cost of Goods Sold
Inventory
36,000
36,000
Eliminating entry:
E(1)
21,600
14,400
7-14
36,000
b.
Sales
Inventory ($3.00 x 20,000 bags)
Cost of Goods Sold
9.00
(3.00)
$
6.00
x 80,000
$480,000
900,000
60,000
840,000
$ 600,000
720,000
$1,320,000
(480,000)
$ 840,000
$400,000
150,000
$550,000
(60,000)
$490,000
(36,000)
$454,000
Alternate computation:
Operating income of Holiday Bakery
Net income of Farmco Products
Unrealized profits ($3.00 x 20,000 units)
Realized net income
Ownership held by Holiday Bakery
Income assigned to controlling interest
7-15
$150,000
(60,000)
$ 90,000
x
.60
$400,000
54,000
$454,000
b.
c.
$
6.00
x 20,000
$120,000
36,000
24,000
60,000
$300,000
250,000
$550,000
60,000
$610,000
(124,000)
$486,000
Alternate computation:
Operating income of Holiday Bakery
Net income of Farmco Products
Inventory profits realized in 20X9
Realized net income
Ownership held by Holiday Bakery
$250,000
60,000
$310,000
x
.60
7-16
$300,000
186,000
$486,000
b.
$ 30,000
80,000
$400,000
200,000
$600,000
(110,000)
$490,000
$250,000
120,000
$370,000
(100,500)
$269,500
c.
d.
$ 20,000
24,000
$ 44,000
$ 50,000
60,000
$110,000
(16,000)
(37,500)
7-17
$ 28,000
72,500
$100,500
$ 45,000
(7,500)
$ 37,500
x
.40
$ 15,000
$107,000
(27,000)
$ 80,000
45,000
$125,000
$ 2,000
7,500
15,000
(24,500)
$ 98,500
400,000
Cash
Sales
Sale of inventory to Gord Corporation.
300,000
400,000
400,000
300,000
400,000
300,000
Cash
Sales
Sale of inventory to nonaffiliates.
360,000
180,000
b.
c.
7-18
$ 80,000
40,000
300,000
360,000
180,000
$230,000
120,000
$350,000
(30,000)
$320,000
E7-12 (continued)
d.
Sales
Inventory
Cost of Goods Sold
300,000
40,000
340,000
7-19
$400,000
180,000
$580,000
(240,000)
$340,000
$160,000
90,000
$250,000
(15,000)
$235,000
c.
$ 30,000
$110,000
(10,000)
55,000
$75,000
d.
(55,000)
$20,000
$ 30,000
70,000
85,000
$185,000
7-20
$220,000
85,000
$305,000
15,000
(10,000)
(55,000)
(27,000)
$228,000
Eliminating entries:
E(1)
E(2)
E(3)
150,000
250,000
Retained Earnings
Noncontrolling Interest
Inventory
Eliminate unrealized inventory profit
of Hingle Company.
28,000
12,000
Retained Earnings
Inventory
Eliminate unrealized inventory profit
of Doorst Corporation.
10,000
b.
280,000
120,000
40,000
10,000
Doorst
Corp.
Hingle
Co.
98,000
150,000
40,000
100,000
310,000
280,000
280,000
838,000
420,000
70,000
200,000
568,000
20,000
150,000
250,000
838,000
420,000
7-21
Eliminations
Debit
Credit
(2) 40,000
(3) 10,000
Consolidated
138,000
200,000
590,000
(1)280,000
(1)150,000
(1)250,000
(2) 28,000
(3) 10,000
(2) 12,000
450,000
928,000
90,000
200,000
(1)120,000
450,000
530,000
108,000
928,000
150,000
100,000
150,000
100,000
150,000
Cash
Sales
Sale of inventory to Torkel Company.
150,000
150,000
150,000
150,000
150,000
150,000
Cash
Sales
Sale of inventory to nonaffiliates.
120,000
90,000
b.
c.
7-22
150,000
120,000
90,000
E7-15* (continued)
d.
Sales
Cost of Goods Sold
Inventory
300,000
280,000
20,000
$100,000
150,000
90,000
$340,000
(60,000)
$280,000
7-23
$60,000
(40,000)
$20,000
Inventory
Cash (Accounts Payable)
Record purchases from nonaffiliate.
150,000
(2)
60,000
(3)
40,000
150,000
60,000
40,000
b.
(1)
Inventory
Cash (Accounts Payable)
Record purchases from Spice Company.
60,000
(2)
90,000
(3)
45,000
60,000
90,000
45,000
Eliminating entry:
E(1)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory.
7-24
60,000
55,000
5,000
Eliminating entries:
E(1)
E(2)
b.
7-25
7,500
2,500
240,000
20X8
$350,000
(10,000)
$340,000
x
.25
$ 85,000
10,000
190,000
50,000
20X9
$420,000
10,000
(50,000)
$380,000
x
.25
$ 95,000
SOLUTIONS TO PROBLEMS
P7-18 Consolidated Income Statement Data
a.
b.
c.
E(1)
E(2)
d.
15,000
10,000
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory.
180,000
25,000
165,000
15,000
$ 90,000
25,000
(15,000)
$100,000
x
.40
$ 40,000
20X2
20X3
20X4
$150,000
100,000
$250,000
$240,000
90,000
$330,000
$300,000
160,000
$460,000
(14,000)
14,000
$236,000
(34,400)
$201,600
7-26
(21,000)
21,000
$323,000
(24,000)
$457,000
(33,200)
$289,800
(62,800)
$394,200
$118,000
65,000
$183,000
25,000
40,000
(14,000)
(55,000)
Add:
(3,000)
$176,000
(14,100)
$161,900
$140,000
(100,000)
40,000
.30
$ 12,000
.70
Accounts Payable
Accounts Receivable
Eliminate intercompany
receivable/payable.
E(2)
Sales
Inventory
Cost of Goods Sold
Eliminate intercompany sale of inventory.
7-27
80,000
140,000
80,000
12,000
128,000
b.
$ 680,000
(400,000)
(240,000)
$ 40,000
c.
$ 60,000
30,000
$ 90,000
40,000
$130,000
x
.75
$ 97,500
e.
30,000
$320,000
d.
$180,000
110,000
$ 60,000
112,000
$172,000
x
.75
$129,000
7,500
$136,500
7-28
$420,000
260,000
$680,000
(650,000)
$ 30,000
P7-22 (continued)
f.
g.
h.
$125,000
90,000
$215,000
(211,000)
$ 4,000
Sales
Cost of Goods Sold
Inventory
30,000
i.
26,000
4,000
$310,000
170,000
(26,000)
$454,000
(445,000)
$ 9,000
7-29
$145,000
(55,000)
$ 90,000
$ 86,000
20,000
$106,000
(89,000)
17,000
$107,000
E(2)
E(3)
E(4)
E(5)
32,000
9,000
90,000
220,000
16,000
4,000
32,000
9,000
248,000
62,000
20,000
Sales
150,000
Cost of Goods Sold
135,000
Inventory
15,000
Eliminate unrealized inventory profit:
$15,000
= $ 45,000 - [$45,000 x ($100,000 / $150,000)]
$135,000 = $100,000 CGS recorded by Superior
105,000 CGS recorded by Clean Air
$205,000
(70,000) Consolidated amount:
$100,000 x ($105,000 / $150,000)
$135,000 Required elimination
7-30
P7-23 (continued)
b.
c.
$ 45,000
40,000
$ 85,000
20,000
(15,000)
$ 90,000
(9,000)
$ 81,000
7-31
$ 90,000
260,000
(15,000)
$335,000
x
.20
$ 67,000
b.
c.
$80,000
$37,500
$20,000
(4,000)
$ 76,000
2,000
(1,500)
38,000
3,000
(6,000)
17,000
$131,000
$ 7,000
(4,000)
$ 3,000
$12,000
(1,500)
10,500
$15,000
(6,000)
9,000
$22,500
$38,000
$17,000
7-32
.30
.10
$11,400
1,700
$13,100
P7-25
a.
b.
18,000
(54,000)
$1,305,000
$90,000
x
.90
$81,000
d.
81,000
c.
$1,260,000
$90,000
6,000
(14,000)
$82,000
x
.10
$ 8,200
7-33
$1,400,000
90,000
(60,000)
$1,430,000
(14,000)
20,000
$1,436,000
x
.10
$ 143,600
P7-25 (continued)
e.
f.
$120,000
(14,000)
$100,000
(2,000)
98,000
$204,000
g.
$106,000
$240,000
90,000
$330,000
14,000
(16,000)
$328,000
E(2)
7-34
81,000
8,200
54,000
27,000
6,000
2,200
P7-25 (continued)
E(3)
E(4)
E(5)
E(6)
18,000
2,000
400,000
200,000
790,000
10,000
5,400
600
E(7)
8,000
E(8)
Sales
Inventory
Cost of Goods Sold
Eliminate intercompany sale of inventory
by Priority Corporation.
36,000
E(9)
Sales
Inventory
Cost of Goods Sold
Eliminate intercompany sale of inventory
by Tall Company.
90,000
7-35
18,000
2,000
1,260,000
140,000
6,000
8,000
2,000
34,000
14,000
76,000
b.
Eliminating entries:
E(1)
20,000
E(2)
12,600
8,400
E(3)
Sales
Inventory
Cost of goods sold
Eliminate intercompany sale of inventory
by Proud Company.
60,000
E(4)
Sales
Inventory
Cost of goods sold
Eliminate intercompany sale of inventory
by Slinky Company.
240,000
20,000
15,000
6,000
2,000
58,000
30,000
210,000
$ 40,000
35,000
36,000
50,000
$161,000
7-36
b.
6,000
18,000
6,000
18,000
18,000
E(2)
11,680
E(3)
E(4)
2,040
1,360
E(5)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany upstream sale of
inventory by Troll Corporation:
$4,200 = ($35,000 - $21,000) x .30
35,000
E(6)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany downstream sale of
inventory by Bell Company:
$6,500 = $13,000 x ($14,000 / $28,000)
28,000
7-37
6,000
12,000
4,000
7,680
100,800
67,200
3,400
30,800
4,200
21,500
6,500
P7-27 (continued)
c.
Bell
Co.
200,000
Troll
Corp.
120,000
18,000
218,000
99,800
120,000
61,000
25,000
6,000
(130,800)
15,000
14,000
(90,000)
87,200
230,000
30,000
50,000
87,200
317,200
(40,000)
30,000
80,000
(10,000)
Sales
Depreciation Expense
Interest Expense
Debits
Consolidated Net Income
Income to Noncontrolling Interest
Income, carry forward
Ret. Earnings, Jan. 1
Income, from above
Dividends Declared
Ret. Earnings, Dec. 31,
carry forward
Cash and Accounts
Receivable
Inventory
277,200
70,000
69,400
60,000
51,200
55,000
Land
Buildings and Equipment
Investment in Troll
Corporation Stock
40,000
520,000
30,000
350,000
Debits
Accum. Depreciation
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Bell Company
Troll Corporation
Retained Earnings,
from above
Noncontrolling
Interest
802,200
175,000
68,800
80,000
1,200
Credits
802,200
Eliminations
Debit
Credit
(5) 35,000
(6) 28,000
(1) 18,000
(4) 3,400
(5) 30,800
(6) 21,500
(2) 11,680
92,680
(3) 50,000
(4) 2,040
92,680
277,200
55,700
(1)
(2)
144,720
(3) 18,000
112,800
200,000
55,700
6,000
4,000
65,700
(5)
(6)
4,200
6,500
(1) 12,000
(3)100,800
486,200
75,000
41,200
200,000
Consolidated
257,000
257,000
105,100
40,000
20,000
(165,100
)
91,900
(11,680)
80,220
227,960
80,220
308,180
(40,000)
268,180
120,600
104,300
88,000
870,000
1,182,900
250,000
110,000
280,000
1,200
200,000
100,000
(3)100,000
70,000
144,720
65,700
268,180
1,360
(2) 7,680
(3) 67 200
264,080
73,520
1,182,900
(4)
486,200
7-38
264,080
7-39
Eliminating entries:
E(1)
E(2)
E(3)
E(4)
E(5)
14,000
7,950
150,000
250,000
36,000
14,000
22,000
21,000
9,000
7-40
3,500
10,500
1,500
6,450
305,200
130,800
36,000
30,000
P7-28 (continued)
E(6)
15,000
E(7)
Sales
Cost of Goods and Services
Inventory
Eliminate intercompany upstream sale of
inventory by West Company:
$25,000 = $62,000 - $37,000
62,000
E(8)
Sales
90,000
Cost of Goods and Services
82,000
Inventory
8,000
Eliminate intercompany downstream sale of
inventory by Crow Corporation:
$8,000
= ($90,000 - $54,000) x ($20,000 / $90,000)
$82,000
=
$ 54,000 CGS recorded by Crow Corporation
70,000 CGS recorded by West Company
$ 124,000
(42,000) Consolidated amount
[$54,000 x ($70,000 / $90,000)]
$ 82,000 Required elimination
E(9)
7-41
7,350
3,150
15,000
37,000
25,000
1,500
9,000
P7-28 (continued)
b.
West
Item
Sales and Service Revenue
Corp.
300,000
Co.
200,000
14,000
314,000
200,000
200,000
150,000
Depreciation Expense
Debits
Consolidated Net Income
Income to Noncontrolling Interest
Income, carry forward
20,000
568,000
250,000
74,000
642,000
(35,000)
20,000
270,000
(5,000)
607,000
265,000
81,300
200,000
85,000
110,000
270,000
250,000
Differential
Goodwill
Debits
Accounts Payable
Common Stock
Ret. Earnings, from above
Noncontrolling Interest
Credits
Debit
(7) 62,000
(8) 90,000
(1) 14,000
(2)
445,000
30,000
150,000
265,000
867,000
445,000
7-42
30,000
15,000
37,000
82,000
1,500
165,500
(3)250,000
(5) 21,000
(6) 15,000
(9) 7,350
173,950
165,500
(1)
(2)
467,300
3,500
1,500
170,500
(7) 25,000
(8) 8,000
(4) 14,000
(3) 36,000
(4) 22,000
(3)150,000
467,300
(5) 9,000
(9) 3,150
701,450
idated
348,000
7,950
173,950
315,700
867,000
60,000
200,000
607,000
Consol-
Credit
(5)
(6)
(7)
(8)
(9)
40,000
30,000
(240,000) (180,000)
74,000
Land, Buildings
& Equipment (net)
Investment in West
Company Stock
Eliminations
(9)
9,000
(1) 10,500
(3) 305,200
(4) 36,000
170,500
(2) 6,450
(3)130,800
701,450
348,000
186,000
68,500
(254,500)
93,500
(7,950)
85,550
524,650
85,550
610,200
(35,000)
575,200
166,300
277,000
525,000
22,000
990,300
90,000
200,000
575,200
125,100
990,300
P7-28 (continued)
c.
$607,000
(8,000)
(17,500)
(6,300)
$575,200
b.
Bunker
Corp.
$660,000
(140,000)
$520,000
Harrison
Co.
$510,000
(240,000)
$270,000
$660,000
1.4
$471,429
$510,000
1.2
$425,000
(128,000)
$343,429
(232,000)
$193,000
Consolidated
$790,000
$536,429
Eliminating entries:
E(1)
Sales
Inventory
Cost of Goods Sold
Elimination of sales by Bunker to Harrison:
$12,000 = $42,000 - ($42,000 / 1.40)
$128,000 = $140,000 - $12,000
140,000
E(2)
Sales
Inventory
Cost of Goods Sold
Elimination of sales by Harrison to Bunker:
$8,000 = $48,000 - ($48,000 / 1.20)
$232,000 = $240,000 - $8,000
240,000
7-43
12,000
128,000
8,000
232,000
P7-29 (continued)
c.
$70,000
20,000
$90,000
(12,000)
(8,000)
$70,000
(2,400)
$67,600
$48,000
(8,000)
$42,000
(12,000)
7-44
$40,000
30,000
$70,000
Eliminating entries:
E(1)
11,200
E(2)
5,100
E(3)
70,000
60,000
46,000
10,500
700
4,500
600
123,200
52,800
$108,500
46,500
(100,000)
$ 55,000
(2,000)
(7,000)
$46,000
20,000
28,000
7-45
2,000
46,000
P7-30 (continued)
E(5)
E(6)
Depreciation Expense
Amortization Expense
Accumulated Depreciation
Patent
Amortize differential:
$2,000 = $20,000 / 10 years
$7,000 = $35,000 / 5 years
2,000
7,000
11,200
4,800
E(7)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Bock Company:
$8,000 = $24,000 - ($24,000 x 2/3)
90,000
E(8)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Pine Corporation:
$3,800 = $7,600 - ($7,600 x 1/2)
30,000
E(9)
10,500
4,500
7-46
2,000
7,000
9,000
7,000
82,000
8,000
26,200
3,800
15,000
P7-30 (continued)
b.
Bock
Co.
Sales
260,000
125,000
Other Income
Income from Subsidiary
Credits
Cost of Goods Sold
13,600
11,200
284,800
186,000
125,000
79,800
20,000
16,000
15,000
5,200
Item
Depreciation Expense
Interest Expense
Amortization Expense
Debits
Consolidated Net Income
Income to Noncontrolling Interest
Income, carry forward
(222,000) (100,000)
62,800
25,000
139,100
60,000
62,800
201,900
(30,000)
25,000
85,000
(15,000)
171,900
70,000
15,400
165,000
21,600
35,000
80,000
340,000
40,000
260,000
Land
Buildings and Equipment
Investment in Bock
Company Stock
Differential
Patent
Debits
Eliminations
Debit
Credit
(7) 90,000
(8) 30,000
356,600
7-47
(6) 9,000
(7) 82,000
(8) 26,200
(5) 7,000
(2) 5,100
145,300
117,200
(3) 60,000
(6) 11,200
(9) 10,500
145,300
117,200
(1) 10,500
(2) 4,500
227,000
(4) 20,000
123,900
724,300
265,000
13,600
(1) 11,200
(5) 2,000
(3) 46,000
(4) 28,000
Consolidated
132,200
(6) 7,000
(7) 8,000
(8) 3,800
(9) 15,000
(1)
700
(3)123,200
(4) 46,000
(5) 7,000
278,600
148,600
37,000
21,200
7,000
(213,800)
64,800
(5,100)
59,700
117,400
59,700
177,100
(30,000)
147,100
37,000
181,200
105,000
620,000
21,000
964,200
P7-30 (continued)
Item
Pine
Corp.
Bock
Co.
Accum. Depreciation
140,000
80,000
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Pine Corporation
Bock Company
Retained Earnings,
from above
Noncontrolling
Interest
92,400
200,000
35,000
100,000
1,600
Credits
724,300
120,000
171,900
Eliminations
Debit
Credit
(4) 2,000
(5) 2,000
Consolidated
224,000
127,400
300,000
1,600
120,000
70,000
(3) 70,000
70,000
227,000
132,200
147,100
356,600
(6) 4,800
(9) 4,500
400,300
(2)
600
(3) 52,800
400,300
44,100
964,200
7-48
P7-30 (continued)
Note: Financial statements are not required.
Pine Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X3
Cash and Accounts Receivable
Inventory
Land
Buildings and Equipment
Less: Accumulated Depreciation
Patent
Total Assets
$620,000
(224,000)
Accounts Payable
Bonds Payable
Bond Premium
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
$300,000
1,600
$120,000
147,100
$267,100
44,100
$ 37,000
181,200
105,000
396,000
21,000
$740,200
$127,400
301,600
311,200
$740,200
$148,600
37,000
21,200
7,000
7-49
$265,000
13,600
$278,600
(213,800)
$ 64,800
(5,100)
$ 59,700
P7-30 (continued)
$117,400
59,700
$177,100
(30,000)
$147,100
21,000
E(2)
9,600
E(3)
7-50
50,000
150,000
40,000
12,000
9,000
8,000
1,600
144,000
96,000
P7-31 (continued)
E(4)
Goodwill
Differential
Assign differential to goodwill.
40,000
E(5)
10,000
E(6)
6,000
4,000
E(7)
4,000
E(8)
4,800
3,200
E(9)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Bower:
$2,000 = $7,000 - ($7,000 / 1.40)
22,000
E(10)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Concerto Company:
$9,000 = $54,000 - ($54,000 / 1.20)
90,000
7-51
40,000
10,000
10,000
4,000
8,000
20,000
2,000
81,000
9,000
P7-31 (continued)
b.
Concerto
Co.
Sales
400,000
200,000
21,000
421,000
280,000
200,000
120,000
Item
Depreciation and
Amortization
Goodwill Impairment Loss
Other Expenses
Debits
Consolidated Net Income
Income to Noncontrolling Interest
Income, carry forward
25,000
15,000
35,000
30,000
(340,000) (165,000)
81,000
35,000
293,800
150,000
81,000
374,800
(50,000)
35,000
185,000
(20,000)
324,800
165,000
7-52
Eliminations
Debit
Credit
(9) 22,000
(10) 90,000
(1) 21,000
488,000
(7) 4,000
(8) 8,000
(9) 20,000
(10)81,000
9,600
152,600
113,000
(3)150,000
(6) 6,000
(7) 4,000
(8) 4,800
152,600
113,000
(1) 12,000
(2) 8,000
317,400
488,000
287,000
40,000
10,000
65,000
(402,000)
86,000
(5) 10,000
(2)
Consolidated
133,000
(9,600)
76,400
279,000
76,400
355,400
(50,000)
305,400
P7-31 (continued)
Item
Bower
Corp.
Concerto
Co.
Cash
Accounts Receivable
Inventory
26,800
80,000
120,000
35,000
40,000
90,000
Land
Buildings and Equipment
Investment in Concerto
Company Stock
70,000
340,000
20,000
200,000
Differential
Goodwill
Debits
Eliminations
Debit
Credit
(9) 2,000
(10) 9,000
(6) 10,000
153,000
789,800
385,000
Accumulated Depreciation
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings,
from above
Noncontrolling Interest
165,000
80,000
120,000
100,000
85,000
15,000
70,000
50,000
324,800
165,000
Credits
789,800
385,000
7-53
(3) 40,000
(4) 40,000
(1) 9,000
(3)144,000
(4) 40,000
(5) 10,000
61,800
120,000
199,000
80,000
540,000
30,000
1,030,800
250,000
95,000
190,000
100,000
(3) 50,000
317,400
(6) 4,000
(8) 3,200
454,600
Consolidated
133,000
(2) 1,600
(3) 96,000
454,600
305,400
90,400
1,030,800
b.
(15,000)
$18,000
20,000
$38,000
(12,000)
(26,000)
$822,000
c.
$593,000
270,000
$137,000
130,000
$267,000
(4,000)
$263,000
7-54
$70,000
(3,000)
15,000
(4,000)
$78,000
x
.10
$ 7,800
P7-32 (continued)
d.
e.
$ 50,000
165,000
70,000
(20,000)
$265,000
15,000
(4,000)
$276,000
x
.10
$ 27,600
f.
$248,500
171,000
(40,000)
$379,500
13,500
(3,600)
$389,400
Eliminating entries:
E(1)
63,000
E(2)
7,800
E(3)
50,000
165,000
7-55
18,000
45,000
2,000
5,800
193,500
21,500
P7-32 (continued)
E(4)
42,000
3,000
E(5)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Block Corporation.
30,000
E(6)
13,500
1,500
7-56
16,200
1,800
27,000
26,000
4,000
15,000
P7-32 (continued)
g.
Item
Sales
Other Income
Income from Subsidiary
Credits
Cost of Goods Sold
Depreciation Expense
Other Expenses
Debits
Consolidated Net Income
Income to Noncontrolling Interest
Income, carry forward
Foster
Co.
815,000
26,000
63,000
904,00
0
593,000
Block
Corp.
415,000
15,000
430,000
45,000
15,000
95,000
75,000
(733,000) (360,000)
70,000
248,500
165,000
171,000
419,500
(40,000)
70,000
235,000
(20,000)
379,500
215,000
187,000
80,000
40,000
137,000
80,000
500,000
57,400
90,000
10,000
130,000
60,000
250,000
Debits
238,500
1,262,500
(5) 30,000
597,400
7-57
(4)
3,000
(2)
7,800
103,800
(3)165,000
(6) 13,500
103,800
Consolidated
1,200,000
41,000
(1) 63,000
270,000
171,000
Cash
Accounts Receivable
Other Receivables
Inventory
Land
Buildings and Equipment
Investment in Block
Corporation Stock
Eliminations
Debit
Credit
1,241,000
(5) 26,000
(6) 15,000
41,000
(4) 16,200
41,000
(1) 18,000
(2) 2,000
282,300
77,200
(5)
4,000
(4) 42,000
(1) 45,000
(3)193,500
822,000
63,000
170,000
(1,055,000)
186,000
(7,800)
178,200
251,200
178,200
429,400
(40,000)
389,400
244,400
170,000
50,000
263,000
140,000
792,000
1,659,400
P7-32 (continued)
Item
Accum. Depreciation
Accounts Payable
Other Payables
Bonds Payable
Bond Premium
Common Stock
Foster Company
Block Corporation
Additional Paid-In
Capital
Retained Earnings,
from above
Noncontrolling
Interest
Credits
Foster
Co.
155,000
63,000
95,000
250,000
210,000
Block
Corp.
Eliminations
Debit
Credit
75,000
35,000
20,000
200,000
2,400
50,000
(4) 27,000
1,262,500
257,000
98,000
115,000
450,000
2,400
210,000
(3) 50,000
110,000
379,500
Consolidated
110,000
215,000
597,400
7-58
282,300
77,200
389,400
(6) 1,500
(2) 5,800
(3) 21,500
(4) 1,800
375,800
27,600
1,659,400
375,800
Cash
Assets
Merchandise Inventory
Pine
Corp.
Slim
Corp.
105,000
15,000
410,000
120,000
920,000
670,000
Plant and
Equipment, net
1,000,000
400,000
Investment in Slim
1,170,000
Liabilities and
Stockholders' Equity
Accounts Payable and
Other Current
Liabilities
Debit
Credit
[b]
900
1,205,00
0
140,000
305,000
500,000
200,000
2,965,000
700,000
Noncontrolling
900
5,000
100,000
90,000
335,000
[6]
3,000
1,587,000
1,400,000
90,900
[b]
[1]
[2]
900
450,000
810,000
500,000
3,942,000
[3]
900
[4]
5,000
[5] 100,000
[7] 90,000
249,100
[2] 200,000
500,000
[2] 700,000
[6]
3,000
[a]
90,900
[1]
50,000
7-59
Idated
[3]
[4]
[5]
[7]
[1] 500,000
3,605,000
Consol-
120,000
[a]
Goodwill
Totals
Adjustments
and Eliminations
3,052,900
Interest, 10 percent
Totals
[2]
3,605,000
1,205,00
0
7-60
1,690,700
90,000
140,000
1,690,700
3,942,000
P7-33 (continued)
Explanations of Workpaper Adjustments and Eliminations
[a]
[b]
[1]
[2]
To record goodwill:
Fair value of compensation given by Pine
Fair value of nonconctolling interest at acquisition
Slim Corporation's book value at January 1, 20X6:
Common stock
Retained earnings
Total book value
Goodwill
$700,000
(600,000)
$100,000
1,000
$101,000
$ 90,900
$900
$1,170,000
130,000
$200,000
600,000
(800,000)
$ 500,000
$200,000
700,000
$900,000
$810,000
90,000
$900,000
[3]
[4]
[5]
$100,000
[6]
$ 300,000
$ 15,000
x
.20
$ 3,000
[7]
$900
$5,000
7-61
$90,000
b.
Cash
Investment in Sharp Company Stock
Record dividend from Sharp Company:
$25,000 x .80
20,000
(2)
32,000
(3)
4,000
20,000
32,000
4,000
E(2)
6,600
E(3)
100,000
20,000
215,000
35,000
50,000
5,000
E(4)
7-62
28,000
20,000
8,000
5,000
1,600
296,000
74,000
20,000
35,000
P 7-34 (continued)
E(5)
6,400
1,600
E(6)
2,000
E(7)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Sharp Company.
45,000
E(8)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Randall Corporation.
12,000
E(9)
25,000
17,500
E(10)
$ 6,250
(3,750)
$ 2,500
$52,500
(12,500)
$40,000
Accounts Payable
Accounts Receivable
Eliminate intercorporate
receivable/payable.
10,000
7-63
8,000
2,000
35,000
10,000
9,000
3,000
2,500
40,000
10,000
P7-34 (continued)
c.
Sharp
Co.
Sales
500,000
250,000
Other Income
Income from Subsidiary
Credits
Cost of Goods Sold
20,400
28,000
548,400
416,000
30,000
Item
280,000
202,000
30,000
20,000
24,000
18,000
(470,000) (240,000)
78,400
40,000
345,900
215,000
78,400
424,300
(50,000)
40,000
255,000
(25,000)
374,300
230,000
7-64
Eliminations
Debit
Credit
(7) 45,000
(8) 12,000
693,000
50,400
(1) 28,000
(4)
5,000
(5) 8,000
(6) 2,000
(7) 35,000
(8) 9,000
(9) 2,500
(2)
6,600
96,600
56,500
(3)215,000
(5) 6,400
(6) 2,000
(9) 17,500
96,600
56,500
(1) 20,000
(2) 5,000
337,500
Consolidated
81,500
743,400
564,000
52,500
42,000
(658,500)
84,900
(6,600)
78,300
320,000
78,300
398,300
(50,000)
348,300
P7-34 (continued)
Item
Randall
Corp.
Sharp
Co.
Cash
Accounts Receivable
Inventory
130,300
80,000
170,000
10,000
70,000
110,000
600,000
400,000
Investment in Sharp
Company Stock
304,000
Differential
Debits
Eliminations
Debit
Credit
(4) 50,000
(9) 25,000
(3) 35,000
1,284,300
590,000
Accum. Depreciation
310,000
120,000
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Additional Paid-In
Capital
Retained Earnings,
from above
Noncontrolling Interest
100,000
300,000
15,200
100,000
4,800
100,000
(10) 10,000
20,000
(3) 20,000
Credits
200,000
374,300
230,000
1,284,300
590,000
7-65
(10) 10,000
(7) 10,000
(8) 3,000
337,500
1,600
579,100
140,300
140,000
267,000
1,075,000
(1) 8,000
(3)296,000
(4) 35,000
(4) 20,000
(9) 40,000
(3)100,000
(5)
Consolidated
81,500
(2) 1,600
(3) 74,000
579,100
1,622,300
490,000
105,200
400,000
4,800
200,000
348,300
74,000
1,622,300
P7-34 (continued)
d.
Cash
Accounts Receivable
Inventory
Total Current Assets
Buildings and Equipment
Less: Accumulated Depreciation
Total Assets
$ 140,300
140,000
267,000
$ 547,300
$1,065,000
(486,000)
Accounts Payable
Bonds Payable
Bond Premium
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
579,000
$1,126,300
$ 105,200
$ 400,000
4,800
404,800
$ 200,000
348,300
$ 548,300
68,000
616,300
$1,126,300
$ 693,000
50,400
$ 743,400
$ 564,000
52,500
42,000
(658,500)
$ 84,900
(6,600)
$ 78,300
$ 320,000
78,300
$ 398,300
7-66
(50,000)
$ 348,300
7-67
Brey Inc.
Dr. (Cr.)
(3,800,000 (1,500,000
)
)
(181,000)
(30,000)
2,360,000
870,000
(190,000
)
Retained Earnings
Statement:
Balance, 1/1/X9
(440,000)
(156,000)
Net Income
(551,000)
(190,000)
(991,000
)
40,000
(306,000
)
570,000
150,000
860,000
1,060,000
350,000
410,000
1,320,000
680,000
(370,000)
(210,000)
Dividends Paid
Balance, 12/31/X9
Balance Sheet:
Assets:
Cash
Accounts
Receivable (net)
Inventories
Land, Plant
and Equipment
Accumulated
Depreciation
Investment in Brey
440,000
891,000
Goodwill
Total Assets
[7]
180,000
[1]
181,000
[5]
30,000
4,331,000
1,380,000
7-68
[3]
9,000
[a]
435,000
[2]
156,000
[a]
435,000
[b]
591,000
Adjusted
Balance
(5,120,000)
[7]
162,000
[4]
35,000
1,100,00
0
(551,000
)
Net Income
Adjustments
and Eliminations
Dr.
Cr.
3,068,000
35,000
[6]
2,000
1,547,000
[a]
164,000
(470,000)
(440,000)
[a]
164,000
(470,000)
[1]
[b]
40,000
204,000
(910,000)
720,000
[8]
[7]
86,000
18,000
1,124,000
1,452,000
[2]
54,000
[5]
30,000
2,024,000
[6]
2,000
[3]
9,000
(587,000)
[1]
[2]
[4]
141,000
750,000
35,000
25,000
[2]
60,000
4,758,000
Liabilities and
Stockholders' Equity:
Accounts Payable
and Accrued Expenses
Common Stock
Additional Paid-In
Capital
Retained Earnings
Total Liabilities
and Equity
(1,340,000
)
(1,700,000
)
(594,000)
(300,000)
(80,000)
(991,00
0)
(306,000
)
(400,000)
(4,331,000 (1,380,000
)
)
7-69
[8]
86,000
[2]
400,000
(1,848,000)
[2]
80,000
[b]
591,000
(300,000)
1,273,000
(1,700,000)
[b]
204,000
(910,000)
1,273,000
(4,758,000)
P7-35 (continued)
Explanations of Adjustments and Eliminations:
[1] To eliminate Fran's investment income recognized from Brey, Brey's dividends, and
the change in the investment account during 20X9. Fran's investment is carried at
equity at December 31, 20X9, adjusted for the amortization of the differential assigned to
the machinery.
[2] To eliminate reciprocal elements as of the beginning of the year from the
investment and equity accounts and to assign the differential to machinery and goodwill.
[3] To record amortization of the fair value in excess of book value of Brey's machinery
at date of acquisition ($54,000 / 6).
[4]
[5]
[6] To eliminate the excess depreciation on the warehouse building sold by Fran to
Brey [($86,000 - $66,000) x 1/5 x ].
[7] To eliminate intercompany sales from Brey to Fran and the inter-company profit in
Fran's ending inventory as follows:
Sales
Gross profit
Cost
Total
$180,000
(90,000)
$ 90,000*
On hand
$36,000
(18,000)
$18,000
Sold
$144,000
(72,000)*
$ 72,000
7-70
Randall Corporation
Debit
Credit
Sharp Company
Debit
Credit
$ 130,300
80,000
170,000
600,000
$ 10,000
70,000
110,000
400,000
278,000
416,000
30,000
24,000
50,000
202,000
20,000
18,000
25,000
$ 310,000
100,000
300,000
200,000
$1,778,300
7-71
320,000
500,000
20,400
27,900
$1,778,300
$855,000
$120,000
15,200
100,000
4,800
100,000
20,000
215,000
250,000
30,000
$855,000
P7-36A (continued)
b.
Cash
Investment in Sharp Company Stock
Record dividends from Sharp Company:
$25,000 x .80
20,000
(2)
32,000
(3)
4,000
(4)
6,400
(5)
2,000
(6)
8,000
(7)
3,000
(8)
2,500
7-72
20,000
32,000
4,000
6,400
2,000
8,000
3,000
2,500
P7-36A (continued)
c.
E(2)
6,600
E(3)
100,000
20,000
215,000
35,000
50,000
5,000
E(4)
E(5)
7-73
27,900
6,400
1,600
20,000
7,900
5,000
1,600
296,000
74,000
20,000
35,000
8,000
P7-36A (continued)
E(6)
E(7)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Sharp Company.
45,000
E(8)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Randall Corporation.
12,000
E(9)
25,000
17,500
Accounts Payable
Accounts Receivable
Eliminate intercorporate receivable/payable.
7-74
2,000
2,000
35,000
10,000
9,000
3,000
2,500
40,000
$6,250
(3,750)
$2,500
$52,500
(12,500)
$40,000
10,000
10,000
P7-36A (continued)
d.
Item
Randall
Corp.
Sharp
Co.
Sales
500,000
250,000
Other Income
Income from Subsidiary
Credits
Cost of Goods Sold
20,400
27,900
548,300
416,000
30,000
280,000
202,000
30,000
20,000
24,000
18,000
(470,000) (240,000)
Eliminations
Debit
Credit
(7) 45,000
(8) 12,000
(4)
5,000
(5) 8,000
(6) 2,000
(7) 35,000
(8) 9,000
(9) 2,500
(2)
6,600
96,500
56,500
56,500
40,000
215,000
40,000
255,000
(25,000)
(3)215,000
96,500
Dividends Declared
320,000
78,300
398,300
(50,000)
348,300
230,000
311,500
7-75
693,000
50,400
(1) 27,900
78,300
Consolidated
(1) 20,000
(2) 5,000
81,500
743,400
564,000
52,500
42,000
(658,500)
84,900
(6,600)
78,300
320,000
78,300
398,300
(50,000)
348,300
P7-36A (continued)
Item
Randall
Corp.
Sharp
Co.
Cash
Accounts Receivable
Inventory
130,300
80,000
170,000
10,000
70,000
110,000
600,000
400,000
Differential
Debits
278,000
Eliminations
Debit
Credit
(4)
(9)
(5)
(6)
(9)
(3)
50,000
25,000
6,400
2,000
17,500
35,000
1,258,300
590,000
Accum. Depreciation
310,000
120,000
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Additional Paid-In
Capital
Retained Earnings,
from above
Noncontrolling Interest
100,000
300,000
15,200
100,000
4,800
100,000
(10) 10,000
20,000
(3) 20,000
Credits
200,000
348,300
230,000
1,258,300
590,000
7-76
(10) 10,000
(7) 10,000
(8) 3,000
(1) 7,900
(3)296,000
(4) 35,000
(4) 20,000
(9) 40,000
(3)100,000
(5)
311,500
1,600
579,000
81,500
(2) 1,600
(3) 74,000
579,000
Consolidated
140,300
140,000
267,000
1,075,000
1,622,300
490,000
105,200
400,000
4,800
200,000
348,300
74,000
1,622,300
b.
20,000
20,000
Dividend Income
Dividends Declared
Eliminate dividend income from
subsidiary.
E(2)
E(3)
E(4)
20,000
100,000
20,000
180,000
50,000
E(5)
6,600
7,000
5,000
1,600
280,000
70,000
7,000
$215,000
(180,000)
$ 35,000
x
.20
7,000
50,000
7-77
20,000
50,000
P7-37A (continued)
E(6)
12,000
3,000
E(7)
Depreciation Expense
Accumulated Depreciation
Amortize differential.
5,000
E(8)
6,400
1,600
E(9)
2,000
E(10)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Sharp Company.
45,000
E(11)
Sales
Cost of Goods Sold
Inventory
Eliminate intercompany sale of inventory
by Randall Corporation.
12,000
E(12)
25,000
17,500
$ 6,250
(3,750)
$ 2,500
$52,500
(12,500)
$40,000
7-78
15,000
5,000
8,000
2,000
35,000
10,000
9,000
3,000
2,500
40,000
P7-37A (continued)
E(13)
Accounts Payable
Accounts Receivable
Eliminate intercorporate receivable/payable.
c.
10,000
10,000
Item
Randall
Corp.
Sharp
Co.
Sales
500,000
250,000
Other Income
Dividend Income
Credits
Cost of Goods Sold
20,400
20,000
540,400
416,000
30,000
280,000
202,000
30,000
20,000
24,000
18,000
(470,000) (240,000)
70,400
40,000
329,900
215,000
70,400
400,300
(50,000)
40,000
255,000
(25,000)
350,300
230,000
7-79
Eliminations
Debit
Credit
(10) 45,000
(11) 12,000
693,000
50,400
(1) 20,000
(7)
5,000
(8) 8,000
(9) 2,000
(10) 35,000
(11) 9,000
(12) 2,500
(2)
6,600
88,600
56,500
(3)180,000
(4) 7,000
(6) 12,000
(8) 6,400
(9) 2,000
(12) 17,500
88,600
56,500
(1) 20,000
(2) 5,000
313,500
Consolidated
81,500
743,400
564,000
52,500
42,000
(658,500)
84,900
(6,600)
78,300
320,000
78,300
398,300
(50,000)
348,300
P7-37A (continued)
Item
Randall
Corp.
Sharp
Co.
Cash
Accounts Receivable
Inventory
130,300
80,000
170,000
10,000
70,000
110,000
600,000
400,000
Investment in Sharp
Company Stock
Differential
Debits
280,000
Eliminations
Debit
Credit
(5) 50,000
(12) 25,000
(3) 50,000
1,260,300
590,000
Accum. Depreciation
310,000
120,000
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Additional Paid-In
Capital
Retained Earnings,
from above
Noncontrolling Interest
100,000
300,000
15,200
100,000
4,800
100,000
(13) 10,000
20,000
(3) 20,000
Credits
200,000
350,300
230,000
1,260,300
590,000
(13) 10,000
(10) 10,000
(11) 3,000
313,500
3,000
1,600
573,100
140,300
140,000
267,000
1,075,000
(3)280,000
(5) 50,000
(6) 15,000
(7) 5,000
(12) 40,000
(3)100,000
(6)
(8)
Consolidated
81,500
(2) 1,600
(3) 70,000
(4) 7,000
573,100
1,622,300
490,000
105,200
400,000
4,800
200,000
348,300
74,000
1,622,300