Transfers between Companies Long Corporation produces and sells a broad line of recreational equipment. Each of the major equipment lines is produced by a separate wholly-owned subsidiary, and there are significant intercorporate sales. In 2001, sales reported by Long Corporation and its subsidiaries were as follows:

Required:

a. What is the total amount of sales by Tennis Corporation to unrelated parties?

b. What is the total amount of sales that would be reported in the consolidated income statement for Long Corporation and its subsidiaries?

c. Why is it important that intercorporate sales be eliminated when preparing a consolidated income statement?

d. What are some of the ratios that would be misstated if intercompany sales were not eliminated when preparing the consolidated income statement?

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Amount Purchased by Selling Total Long Company Sales Corp. Tennis Corp. Corp. Corp. Golf Billiard Long $350,000 $ $70,000 $10,000 $25,000 Tennis 250,000 30,000 40,000 5,000 Golf 180,000 10,000 15,000 20,000 Billiard 240,000 20,000 30,000 25,000