5-Parent Co. acquired 100% of Sub, Inc. on January 1, 2021. During 2021, Parent sold goods to Sub for $260,000 that cost Parent $170,000. Sub still owned 30% of the goods at the end of the year. In their pre-consolidation books, cost of goods sold was $1,050,000 for Parent and $375,000 for Sub. Required: a. Prepare all consolidation entries related to inventory and cost of goods sold for 2021. b. Compute consolidated cost of goods sold for 2021. c. Assuming that the remainder of the inventory was sold to third parties during 2022, prepare the 2022 consolidation entry to recognize the previously deferred profit.
5-Parent Co. acquired 100% of Sub, Inc. on January 1, 2021. During 2021, Parent sold goods to Sub for $260,000 that cost Parent $170,000. Sub still owned 30% of the goods at the end of the year. In their pre-consolidation books, cost of goods sold was $1,050,000 for Parent and $375,000 for Sub. Required: a. Prepare all consolidation entries related to inventory and cost of goods sold for 2021. b. Compute consolidated cost of goods sold for 2021. c. Assuming that the remainder of the inventory was sold to third parties during 2022, prepare the 2022 consolidation entry to recognize the previously deferred profit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
5-Parent Co. acquired 100% of Sub, Inc. on January 1, 2021. During 2021, Parent sold goods to Sub for $260,000 that cost Parent $170,000. Sub still owned 30% of the goods at the end of the year. In their pre-consolidation books, cost of goods sold was $1,050,000 for Parent and $375,000 for Sub.
Required:
a. Prepare all consolidation entries related to inventory and cost of goods sold for 2021.
b. Compute consolidated cost of goods sold for 2021.
c. Assuming that the remainder of the inventory was sold to third parties during 2022, prepare the 2022 consolidation entry to recognize the previously deferred profit.
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