Computing the amount equity income and preparing [] consolidation journal entrie Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013: Subsidiary Intercompany Net Income 2013 $500,000 2012 $400,000 Assume that inventory not remaining at the end of the year was sold outside of the consolidated group during the year. Assume the parent company uses the full equity method to account for its subsidiary. a. How much Equity Income should the parent report in its pre-consolidation income statement the year ending 2013 assuming that it uses the equity method of accounting for its Equity Investment? $0 b. Prepare the required [I] consolidation journal entries for 2013. Consolidation Worksheet [Icogs] % Inventory Inventory Gross Remaining at Receivable Sales Profit % End of Year (Payable) $75,000 3096 $25,000 $50,000 2896 10% 996 $20,000 [Isales] [Icogs] [pay) Description + ÷ A + + + + ÷ Debit 0 0 0 0 0 0 0 0 Credit 0 0 0 0 0 0 0 0
Computing the amount equity income and preparing [] consolidation journal entrie Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013: Subsidiary Intercompany Net Income 2013 $500,000 2012 $400,000 Assume that inventory not remaining at the end of the year was sold outside of the consolidated group during the year. Assume the parent company uses the full equity method to account for its subsidiary. a. How much Equity Income should the parent report in its pre-consolidation income statement the year ending 2013 assuming that it uses the equity method of accounting for its Equity Investment? $0 b. Prepare the required [I] consolidation journal entries for 2013. Consolidation Worksheet [Icogs] % Inventory Inventory Gross Remaining at Receivable Sales Profit % End of Year (Payable) $75,000 3096 $25,000 $50,000 2896 10% 996 $20,000 [Isales] [Icogs] [pay) Description + ÷ A + + + + ÷ Debit 0 0 0 0 0 0 0 0 Credit 0 0 0 0 0 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Computing the amount of equity income and preparing [I] consolidation journal entries
Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013:
Subsidiary Intercompany
Net
Income
2013 $500,000
2012 $400,000
[Icogs]
Inventory Gross
Sales Profit %
$75,000
$50,000
[Isales]
[Icogs]
Assume that inventory not remaining at the end of the year was sold outside of the consolidated group during the year. Assume the parent company uses the full equity method to account for its subsidiary.
[payl
a. How much Equity Income should the parent report in its pre-consolidation income statement the year ending 2013 assuming that it uses the equity method of accounting for its Equity Investment?
$0
30%
28%
b. Prepare the required [I] consolidation journal entries for 2013.
Consolidation Worksheet
Description
% Inventory
Remaining at
End of Year
♦
♦
◆
♦
◆
◆
+
10%
9%
Debit
Receivable
(Payable)
0
0
0
0
0
0
0
0
$25,000
$20,000
Credit
0
0
0
0
0
0
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3cadaab7-0242-405d-ab75-d1a15c225b30%2F04204a7a-8021-4627-b34a-2eb5dec15575%2Flxoxk3o_processed.png&w=3840&q=75)
Transcribed Image Text:Computing the amount of equity income and preparing [I] consolidation journal entries
Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013:
Subsidiary Intercompany
Net
Income
2013 $500,000
2012 $400,000
[Icogs]
Inventory Gross
Sales Profit %
$75,000
$50,000
[Isales]
[Icogs]
Assume that inventory not remaining at the end of the year was sold outside of the consolidated group during the year. Assume the parent company uses the full equity method to account for its subsidiary.
[payl
a. How much Equity Income should the parent report in its pre-consolidation income statement the year ending 2013 assuming that it uses the equity method of accounting for its Equity Investment?
$0
30%
28%
b. Prepare the required [I] consolidation journal entries for 2013.
Consolidation Worksheet
Description
% Inventory
Remaining at
End of Year
♦
♦
◆
♦
◆
◆
+
10%
9%
Debit
Receivable
(Payable)
0
0
0
0
0
0
0
0
$25,000
$20,000
Credit
0
0
0
0
0
0
0
0
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