Question 8 Ques 5 points Party Company owns 70% of the common stock of Sunny Company. Sunny Company sells merchandise to Party Company at 25% above cost. During 2019 and 2020, such sales amounted to $500,000 and $600,000, respectively. At the end of each year, Party Company had in its inventory 15% of the goods purchased from Sunny Company during that year. Sunny Company reported net income of $300,000 in each year and did not declare any dividends in any year. Hint: This question is similar to questions 6.1, 6.2 and 6.3. Required: (a) The double entries necessary on the consolidated financial statements workpaper to eliminate the effects of the intercompany sales for the year 2020 have been prepared for you. Fill in the blanks with the appropriate amount. Answer: Debit Credit (1) To eliminate intercompany sales: 600,000 Sales Purchases (Cost of Goods Sold) Fill in the blanks with the appropriate amoun Answer: Debit Credit (1) To eliminate intercompany sales: Sales 600,000 Purchases (Cost of Goods Sold) (2) To recognize gross profit in beginning inventory realized in 2020 Beginning Retained Earnings-P Noncontrolling Interest 1/1 Inventory (Income Statement) (3) To eliminate unrealized intercompany profit in ending inventory 12/31 Inventory (Income Statement) Inventory (Balance Sheet) chi (b) Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statement for 2020, by filling in the blanks in the following table: Answer: 300,000 Reported subsidiary income Add: Realized profit in beginning inventory Less: Unrealized profit in ending inventory = Subsidiary's income realized in transactions with third parties Multiply by noncontrolling interest percentage = Noncontrolling interest in Subsidiary's net income Question 8 Ques 5 points Party Company owns 70% of the common stock of Sunny Company. Sunny Company sells merchandise to Party Company at 25% above cost. During 2019 and 2020, such sales amounted to $500,000 and $600,000, respectively. At the end of each year, Party Company had in its inventory 15% of the goods purchased from Sunny Company during that year. Sunny Company reported net income of $300,000 in each year and did not declare any dividends in any year. Hint: This question is similar to questions 6.1, 6.2 and 6.3. Required: (a) The double entries necessary on the consolidated financial statements workpaper to eliminate the effects of the intercompany sales for the year 2020 have been prepared for you. Fill in the blanks with the appropriate amount. Answer: Debit Credit (1) To eliminate intercompany sales: 600,000 Sales Purchases (Cost of Goods Sold) Fill in the blanks with the appropriate amoun Answer: Debit Credit (1) To eliminate intercompany sales: Sales 600,000 Purchases (Cost of Goods Sold) (2) To recognize gross profit in beginning inventory realized in 2020 Beginning Retained Earnings-P Noncontrolling Interest 1/1 Inventory (Income Statement) (3) To eliminate unrealized intercompany profit in ending inventory 12/31 Inventory (Income Statement) Inventory (Balance Sheet) chi (b) Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statement for 2020, by filling in the blanks in the following table: Answer: 300,000 Reported subsidiary income Add: Realized profit in beginning inventory Less: Unrealized profit in ending inventory = Subsidiary's income realized in transactions with third parties Multiply by noncontrolling interest percentage = Noncontrolling interest in Subsidiary's net income
