Pam Corporation owns an 80 percent interest in Sun Corporation acquired several years ago. Sun regularly sells mer- chandise to Pam at 125 percent of Sun's cost. Gross profit data of Pam and Sun for 2017 are as follows: Pam Sun Sales $1,000 $800 Cost of goods sold Gross profit 640 $160 800 200 During 2017, Pam purchased inventory items from Sun at a transfer price of $400. Pam's December 31, 2016 and 2017, inventories included goods acquired from Sun of $100 and $125, respectively. Assume Pam sells the inventory purchased from Sun in the following year. 1. Consolidated sales of Pam Corporation and Subsidiary for 2017 were: a $1,800 b $1,425 C $1,400 d $1,240 2. The unrealized profits in the year-end 2016 and 2017 inventories were: a $100 and $125, respectively b $80 and $100, respectively c $20 and $25, respectively d $16 and $20, respectively 3. Consolidated cost of goods sold of Pam Corporation and Subsidiary for 2017 was: a $1,024 b $1,045 C $1,052.8 d $1,056

Pam Corporation owns an 80 percent interest in Sun Corporation acquired several years ago. Sun regularly sells mer- chandise to Pam at 125 percent of Sun's cost. Gross profit data of Pam and Sun for 2017 are as follows: Pam Sun Sales $1,000 $800 Cost of goods sold Gross profit 640 $160 800 200 During 2017, Pam purchased inventory items from Sun at a transfer price of $400. Pam's December 31, 2016 and 2017, inventories included goods acquired from Sun of $100 and $125, respectively. Assume Pam sells the inventory purchased from Sun in the following year. 1. Consolidated sales of Pam Corporation and Subsidiary for 2017 were: a $1,800 b $1,425 C $1,400 d $1,240 2. The unrealized profits in the year-end 2016 and 2017 inventories were: a $100 and $125, respectively b $80 and $100, respectively c $20 and $25, respectively d $16 and $20, respectively 3. Consolidated cost of goods sold of Pam Corporation and Subsidiary for 2017 was: a $1,024 b $1,045 C $1,052.8 d $1,056

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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In its 2016 income statement, Hendrickson Company reported cost of goods sold of $340,000. Later, Hendrickson determined that beginning inventory for 2016 was understated by $92,000, and the ending inventory for 2016 was understated by $40,000. What should be the corrected amount for cost of goods sold for 2016? A) $340,000 B) $392,000 C) $288,000 D) $380,000
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The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2016. At December 31, 2015, inventories were $120,000 (average cost basis) and were $124,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would have totaled $155,000 at December 31, 2015, and $160,000 at December 31, 2014, if determined on a FIFO basis. A tax rate of 40% is in effect for all years. One hundred thousand common shares were outstanding each year. Income from continuing operations was $400,000 in 2015 and $525,000 in 2016. There were no discontinued operations either year. Required: 1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.) 2. Prepare the 2016–2015 comparative income statements beginning with income from continuing operations. Include per share amounts.
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