11.Snodgrass Corporation is an 80%-owned subsidiary of Prattle Corporation. During 2002, Snodgrass sold merchandise that cost $120,000 to Prattle for $160,000. Prattles ending inventory at December 31, 2002 contained unrealized profit of $8,000 from the intercompany sales.

During 2003, Snodgrass sold merchandise that cost $140,000 to Prattle for $190,000. One-half of this merchandise remained unsold by Prattle at December 31, 2003. For 2003, Prattles separate income (investment income not included) was $250,000 and Snodgrass reported net income was $190,000. Consolidated net income for 2003 will be:

a.$385,000.

b.$388,400.

c.$415,600.

d.$419,000.

12.A 55%-owned subsidiary makes the following entry to record a sale of merchandise to its parent:

Accounts Receivable 120,000

Sales Revenue 120,000

All sales made by the subsidiary are at 125% of cost. One-third of this merchandise remains in the parents inventory at year-end. A working paper entry to eliminate unrealized profits from consolidated inventory would include a credit to Inventory in the amount of:

a.$ 8,000.

b.$10,000.

c.$16,000.

d.$20,000.

Use the following information to answer questions 13, 14, and 15.

Robinette Corporation acquired 70% of the voting common stock of Shipman Outlet Stores, Incorporated (Shipman), at a time when Shipmans book values and fair values were equal. Robinette manufactures home furnishings that are sold at a standard markup to department stores, as well as to its own outlet, Shipman. Separate incomes of Robinette and Shipman for 2003 are as follows:

						Robinette			Shipman
			Sales Revenue		$	700,000		$	400,000
			Cost of Goods Sold			400,000			200,000
			Operating Expenses			120,000			100,000
			Separate incomes		$	180,000		$	100,000
		Intercompany sales from Robinette to Shipman for 2002 and 2003 are summarized as follows:
			Cost		Selling Price		Unsold at Year-end
		Intercompany sales - 2002	$ 250,000		$ 390,000		40%
		Intercompany sales 2003	$ 175,000		$ 275,000		50%

13.The 2003 consolidated income statement will show sales revenue of:

a.$710,000.

b.$815,000.

c.$944,000.

d.$962,500.

14.The 2003 consolidated income statement will show cost of goods sold of:

a.$291,000.

b.$319,000.

c.$325,000.

d.$331,000.

15.The separate balance sheets of Robinette and Shipman at year-end 2003 show an $80,000 account receivable and an $80,000 account payable related to Robinettes sales to Shipman. The amount of the receivable and payable to be eliminated in the consolidation working papers for 2003 is:

a.$ 0.

b.$40,000.

c.$56,000.

d.$80,000.

Use the following information to answer questions 16 through 20.

Ashton Corporation owns 80% of Montauk Corporations common stock that was purchased at its underlying book value. The two companies report the following information for 2002 and 2003.

During 2002, one company sold inventory to the other company for $100,000 which cost the transferor $80,000. As of the end of 2002, 30% of the inventory was unsold. In 2003, the remaining inventory was resold outside the consolidated entity.

			2002 Selected Data:			Ashton			Montauk
			Sales Revenue		$	1,200,000		$	640,000
			Cost of Goods Sold			640,000			310,000
			Other Expenses			200,000			178,000
			Net Income		$	360,000		$	152,000
			Dividends Paid			38,000			0
			2003 Selected Data:			Ashton			Montauk
			Sales Revenue		$	1,160,000		$	890,000
			Cost of Goods Sold			600,000			360,000
			Other Expenses			260,000			342,000
			Net Income		$	300,000		$	188,000
			Dividends Paid			32,000			10,000

16.If the sale referred to above was a downstream sale, the total sales revenue reported in the consolidated income statement for 2002 would be:

a.$1,740,000.

b.$1,760,000.

c.$1,840,000.

d.$1,940,000.

17.If the sale referred to above was a downstream sale, by what amount must Inventory be reduced to reflect the correct balance as of the end of 2002?

a.$ 6,000.

b.$10,000.

c.$14,000.

d.$20,000.

18.For 2002, consolidated net income will be what amount if the intercompany sale was downstream?

a.$475,600.

b.$476,800.

c.$486,400.

d.$506,000.

19.If the intercompany sale mentioned above was an upstream sale, what will be the reported amount of total sales revenue for 2003?

a.$1,900,000.

b.$1,950,000.

c.$2,000,000.

d.$2,050,000.

20.If the intercompany sale was an upstream sale, the total amount of consolidated cost of goods sold for 2003 will be:

a.$954,000.

b.$960,000.

c.$966,000.

d.$984,000.

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