(Intercompany transactions, LO 1) Vonda Inc. (Vonda) is a 100%-owned subsidiary of Atik Ltd. (Atik). During the year ended March 31, 2006, Vonda sold, on credit, merchandise costing $1,000,000 to Atik for $2,000,000. These were the only transactions that Atik and Vonda entered into during 2005 (with each other or with third parties) and there were no other costs incurred.

Required

a. Prepare an income statement for Vonda for the year ended March 31, 2006.

b. What amount of accounts receivable would Vonda report on its March 31, 2006 balance sheet?

c. What amount of inventory and accounts payable would Atik report on its March 31, 2006 balance sheet?

d. Prepare Atik’s March 31, 2006 consolidated income statement assuming that intercompany transactions are not eliminated. How much would be reported for accounts receivable, inventory, and accounts payable on the March 31, 2006 consolidated balance sheet?

e. Prepare Atik’s March 31, 2006 consolidated income statement assuming that intercompany transactions are eliminated. How much would be reported for accounts receivable, inventory, and accounts payable on the March 31, 2006 consolidated balance sheet?

f. Discuss the differences in the information you prepared in parts

(d) and (e).
Which information is more useful to stakeholders? Explain.