a. Prepare a consolidated income statement for Paley Corporation and Subsidiary. Hint: Eliminate the effect of the intercompany sale.Paley Corporation and SubsidiaryConsolidated Income StatementFor the Year Ended December 31, 20Y2Other revenue and expense:Intercompany sales of $eliminated. In addition, cost of goods sold of $00b. Assume that as of December 31, 20Y2, Paley Corporation had not sold the merchandise purchased from Sims Enterprises. How would this affect the preparation of theconsolidated financial statements?The result of theseas $$recorded by Sims Enterprises and the related inventory of $recorded by Simsrecorded by Paley Corporationbe eliminated, and inventory should bebeby $is that the consolidated financial statements will reflect no intercompany sales and the merchandise will still be shown in inventory Preparing a consolidated income statementFor the year ended December 31, 20Y2, the operating results of Paley Corporation and its wholly owned subsidiary, Sims Enterprises, are as follows:PaleySimsCorporation Enterprises3,200,000(1,900,000)1,300,000(750,000)550,00020,000SalesCost of goods soldGross profitOperating expensesOperating incomeInterest revenueInterest expenseNet income570,000900,000(550,000)350,000(125,000)225,000(15,000)210,000During 20Y2, Sims Enterprises sold and received payment of $80,000 for merchandise that was purchased by Paley Corporation. The merchandise sold to Paley cost SimsEnterprises $45,000. Paley Corporation sold the merchandise to another (nonaffiliated) company for $110,000.a. Prepare a consolidated income statement for Paley Corporation and Subsidiary. Hint: Eliminate the effect of the intercompany sale.Paley Corporation and SubsidiaryConsolidated Income StatementFor the Year Ended December 31, 20Y2

To eliminate the effect of the intercompany sale, we need to adjust the sales and cost of goods sold…

Paley Corporation and Subsidiary Consolidated Income Statement For the Year Ended December 31, 20Y2 Other revenue and expense: b. Assume that as of December 31, 20Y2, Paley Corporation had not sold the merchandise purchased from Sims Enterprises. How would this affect the preparation of the consolidated financial statements? Intercompany sales of $ eliminated. In addition, cost of goods sold of The result of these as recorded by Sims Enterprises and the related inventory of $ recorded by Sims recorded by Paley Corporation be eliminated, and inventory should be be by $ is that the consolidated financial statements will reflect no intercompany sales and the merchandise will still be shown in invento

Paley Corporation and Subsidiary Consolidated Income Statement For the Year Ended December 31, 20Y2 Other revenue and expense: b. Assume that as of December 31, 20Y2, Paley Corporation had not sold the merchandise purchased from Sims Enterprises. How would this affect the preparation of the consolidated financial statements? Intercompany sales of $ eliminated. In addition, cost of goods sold of The result of these as recorded by Sims Enterprises and the related inventory of $ recorded by Sims recorded by Paley Corporation be eliminated, and inventory should be be by $ is that the consolidated financial statements will reflect no intercompany sales and the merchandise will still be shown in invento

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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None
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