Crocs, Inc. sells Croslite footbeds to its wholly-owned subsidiaries, Ocean Minded, Inc. and Bite, Inc., for use in manufacturing their footwear. The following intercompany information is available for 2019:

	Ocean Minded	Bite
Merchandise in beginning inventory purchased from Crocs	$920,000	$575,000
Merchandise in ending inventory purchased from Crocs	1,035,000	805,000
Total sales revenue recorded by Crocs	34,500,000	28,750,000

 

Crocs sells the footbeds to its subsidiaries at a markup of 15% on cost. 

Required 

a. Related to the above information, calculate the following balances, reported in the trial balances of Crocs and its subsidiaries at the end of 2019: 

(1) Sales revenue and cost of goods sold, reported on Crocs’ books 

(2) Cost of goods sold, reported on the books of Ocean Minded and Bite.

Enter answers in thousands ($34,500,000 equals $34,500 in thousands).

(in thousands)
Sales revenue reported on Croc's books		63,250
Cost of goods sold reported on Croc's books		55,000
Cost of goods sold reported on Ocean Minded's books		34,385
Cost of goods sold reported on Bite's books		28,520

 

 

 

 

b. Calculate the consolidated balances for inventory and cost of goods sold. 

 

Enter answers in thousands ($28,750,000 equals $28,750 in thousands).

 

 

(in thousands)
Consolidated inventory		1,600
Consolidated cost of goods sold		54,700

 

 

 

c. Prepare the eliminating entries (I) required to consolidate the accounts of Crocs with those of Ocean Minded and Bite at the end of 2019. 

 

Enter answers in thousands ($920,000 equals $920 in thousands).

 

 

Ref.	Description		Debit	Credit
(I-1)	Investment in Ocean Minded		Answer	Answer
	AnswerCost of goods soldInventoryInvestment in BiteSales revenue		Answer	Answer
	AnswerCost of goods soldInventoryInvestment in BiteSales revenue		Answer	Answer
	To recognize confirmed downstream profit in beginning inventories.
(I-2)	AnswerCost of goods soldInventoryInvestment in BiteSales revenue		63,250	Answer
	AnswerCost of goods soldInventoryInvestment in BiteSales revenue		Answer	63,250
	To eliminate gross intercompany sales and purchases.
(I-3)	AnswerCost of goods soldInventoryInvestment in BiteSales revenue		Answer	Answer
	AnswerCost of goods soldInventoryInvestment in BiteSales revenue		Answer	Answer
	To eliminate unconfirmed profit in ending inventories.

 

 

d. Assume Ocean Minded reports net income of $2,000,000 and Bite reports net income of $2,500,000. There are no revaluation write-offs in 2019 or any other intercompany transactions. Calculate equity in net income of Ocean Minded and equity in net income of Bite, as reported by Crocs on its own books, using the complete equity method.

 

Enter answers in thousands ($34,500,000 equals $34,500 in thousands).

 

 

(in thousands)
Equity in net income of Ocean Minded		$Answer
Equity in net income of Bite		$Answer