Pirate Transport bought 80% of the outstanding voting stock of Seaways Shipping at book value several years ago. (At the time of purchase, the fair value and book value of Seaways' net assets were equal.) Pirate sells merchandise to Seaways at 120% above Pirate's cost. Intercompany sales from Pirate to Seaways for 2014 were $550,000. Unrealized profits in Seaways' December 31, 2013 inventory and December 31, 2014 inventory were $17,000 and $16,000, respectively. Seaways reported net income of $900,000 for 2014. Required: To eliminate intercompany profit in the ending inventory, Choose... the cost of goods sold will be To eliminate intercompany sales and cost of goods sold, v Choose... sales revenue will be debited to $16,000 To recognize previously deferred unrealized profits from $721,000 the beginning inventory, investment in seaway will be debited to $17,000 The Pirate's income from Seaways for 2014 is credited to $17,000

Pirate Transport bought 80% of the outstanding voting stock of Seaways Shipping at book value several years ago. (At the time of purchase, the fair value and book value of Seaways' net assets were equal.) Pirate sells merchandise to Seaways at 120% above Pirate's cost. Intercompany sales from Pirate to Seaways for 2014 were $550,000. Unrealized profits in Seaways' December 31, 2013 inventory and December 31, 2014 inventory were $17,000 and $16,000, respectively. Seaways reported net income of $900,000 for 2014. Required: To eliminate intercompany profit in the ending inventory, Choose... the cost of goods sold will be To eliminate intercompany sales and cost of goods sold, v Choose... sales revenue will be debited to $16,000 To recognize previously deferred unrealized profits from $721,000 the beginning inventory, investment in seaway will be debited to $17,000 The Pirate's income from Seaways for 2014 is credited to $17,000

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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