Question
Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available
Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012.
Purchases by Posito 2012 - $8,000 2013 - $12,000 2014 - $15,000
Ending Inventory on Posito Books 2012 - 1,200 2013 - 4,000 2014 - 3,000
Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends
Gargiulo's Net Income 2012 $70,000 2013 - $85,000 2014 $94,000
Dividends Paid by Gargiulo 2012 - 10,000 2013 - 10,000 2014 15,0000
A) Compute the equity in earnings of Gargiulo reported on Posito's books for 2012, 2013, and 2014.
B) Compute the non-controlling interest in Gargiulo's net income for 2012, 2013, and 2014.
C) For consolidation purposes, what amount would be debited to cost of goods sold for the 2012/2013/2014 consolidation worksheet with regard to the unrealized gross profit of that years intra-entity transfer of merchandise?
D) For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2012/2013/2014 consolidation worksheet entry with regard to the unrealized gross profit of the prior years intra-entity transfer (if any) of merchandise?
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