Question
1.During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation (a 90%-owned subsidiary) for a price of $30,550, at
1.During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation (a 90%-owned subsidiary) for a price of $30,550, at a markup of 30% of cost. Subsidiary sold merchandise acquired from Parent to outsider customers for $38,300 during 2019. Included in Subsidiary's January 1, 2019, inventories were goods acquired from Parent at a billed price of $3,900 and included in Subsidiary's December 31, 2019, inventories were goods acquired from Parent at a billed price of $2,600.
(i)Prepare the working paper eliminating entry (in journal entry format) for the intercompany sale of merchandise for the year ended December 31, 2019.
(ii) Show how the working paper eliminating entry in part (i) adjusts cost of goods sold and ending inventory to the correct consolidated balances.
(iii) How (increase or decrease and the amount) is Parent's 2019 equity in income of Subsidiary affected by the intercompany sale of merchandise?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started