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Intercompany inventory transfers with no IIP: An intuitive example P owns 100 percent of S. The following are the only transactions for P and S
Intercompany inventory transfers with no IIP: An intuitive example
P owns 100 percent of S. The following are the only transactions for P and S that took place during 20X1:
P purchased $600 of inventory from X (a non-affiliate).
P sold the inventory to S for $1,000.
S sold the inventory to Y (a non-affiliate) for $1,300 during 20X1
Complete the fiscal-year end 20X1 pre-consolidation income statement and balance sheet values, below. Intuitively derive the consolidated balances.
Exercise A9-1: Intercompany inventory transfers with no IIP: An intuitive example P owns 100 percent of S. The following are the only transactions for P and S that took place during 20X1: P purchased $600 of inventory from X (a non-affiliate). P sold the inventory to S for $1,000. S sold the inventory to Y (a non-affiliate) for $1,300 during 20X1 Required: 1. Draw a "circle and arrows" diagram showing the flow of goods through and between the entities. 2. Provide the equity-method investment-accounting journal entries actually recorded by P in its pre- consolidation accounting records during the year ended December 31, 20X1. (Note that the only on S's books relates to the inventory purchased from P.) It may be helpful if you propose separate ote that the only activity adjustments for (1) the parent's share of the subsidiary's gross profit and (2) the elimination of intercompany profits (.e., if any exist). 3. Complete the fiscal-year end 20X1 pre-consolidation income statement and balance sheet values, below. Intuitively derive the consolidated balances. 20X1. Income Statement (excerpt): P Consolidated Sales CGS Gross Profit Equity income (loss) Net effect on Total Income Exercise A9-1: Intercompany inventory transfers with no IIP: An intuitive example P owns 100 percent of S. The following are the only transactions for P and S that took place during 20X1: P purchased $600 of inventory from X (a non-affiliate). P sold the inventory to S for $1,000. S sold the inventory to Y (a non-affiliate) for $1,300 during 20X1 Required: 1. Draw a "circle and arrows" diagram showing the flow of goods through and between the entities. 2. Provide the equity-method investment-accounting journal entries actually recorded by P in its pre- consolidation accounting records during the year ended December 31, 20X1. (Note that the only on S's books relates to the inventory purchased from P.) It may be helpful if you propose separate ote that the only activity adjustments for (1) the parent's share of the subsidiary's gross profit and (2) the elimination of intercompany profits (.e., if any exist). 3. Complete the fiscal-year end 20X1 pre-consolidation income statement and balance sheet values, below. Intuitively derive the consolidated balances. 20X1. Income Statement (excerpt): P Consolidated Sales CGS Gross Profit Equity income (loss) Net effect on Total IncomeStep by Step Solution
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