Chapter 6 Elimination of Unrealized Profit on Intercompany Sales of Inventory
6-313. A parent company regularly sells merchandise to its 80%-owned subsidiary. Which of thefollowing statements describes the computation of noncontrolling interest income?a.
the subsidiary’s net income times 20%.
(the subsidiary’s net income x 20%) + unrealized prof
its in the beginning inventory
unrealized profits in the ending inventory.c.
(the subsidiary’s net income + unrealized profits in the beginning inventory –
unrealized profitsin the ending inventory) × 20%.d.
(the subsidiary’s net income + unrealized profits
in the ending inventory
unrealized profits inthe beginning inventory) × 20%.14. P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal tofair value. During 2011, P sold merchandise that cost $135,000 to S for $189,000. One-third of this
merchandise remained in S’
s inventory at December 31, 2011. S reported net income of $120,000
for 2011. P’s income from S for 2011
Use the following information for Questions 15 & 16:
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P soldmerchandise that cost $240,000 to S for $3
00,000. Half of this merchandise remained in S’s December 31,
2010 inventory. During 2011, P sold merchandise that cost $375,000 to S for $468,000. Forty percent of
this merchandise inventory remained in S’s December 31, 20
11 inventory. Selected income statementinformation for the two affiliates for the year 2011 is as follows:P _ S _Sales Revenue $2,250,000 $1,125,000Cost of Goods Sold 1,800,000 937,500Gross profit $450,000 $187,50015. Consolidated sales revenue for P and Subsidiary for 2011 are:a.
$3,375,000.16. Consolidated cost of goods sold for P Company and Subsidiary for 2011 are:a.