Karlow Corporation owns 60 percent of the voting shares of Draw Company. During 20X3, Karlow produced 25.000
Question:
Karlow Corporation owns 60 percent of the voting shares of Draw Company. During 20X3, Karlow produced 25.000 computer desks at a cost of \(\$ 82\) each and sold 10.000 desks to Draw Company for \(\$ 94\) each. Draw Company sold 7.000 of the desks to unaffiliated companies for \(\$ 130\) each prior to December 31.20X3, and sold the remainder in early \(20 \mathrm{X} 4\) for \(\$ 140\) each. Both companies use perpetual inventory systems.
\section*{Required}
a. What amounts of cost of goods sold were recorded by Karlow Corporation and Draw Company in 20X3?
b. What amount of cost of goods sold must be reported in the consolidated income statement for 20X3?
c. Give the workpaper eliminating entry or entries needed in preparing consolidated financial statements at December 31, 20X3, relating to the intercorporate sale of inventory.
d. Give the workpaper eliminating entry or entries needed in preparing consolidated financial statements at December 31. 20X4, relating to the intercorporate sale of inventory.
\(e\). Give the workpaper eliminating entry or entries needed in preparing consolidated financial statements at December 31.20X4, relating to the intercorporate sale of inventory if Draw Company had produced the computer desks at a cost of \(\$ 82\) each and sold 10.000 to Karlow Corporation for \(\$ 94\) each in 20X3, with Karlow selling 7.000 desks to unaffiliated companies in \(20 \times 3\) and the remaining 3.000 in \(20 \mathrm{X} 4\).
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9780072444124
5th Edition
Authors: Richard E. Baker, Valdean C. Lembke, Thomas E. King