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

See similar textbooks

Related questions

Q: Tookey Ltd sold inventory items (with a cost of $75 000) to its parent Milky Ltd for $135 000. One…

A: In case one company overtake the assets and liabilities of another company, then accounting for…

Q: On January 1, 2012, Jackson Enterprises opened its doors. Jackson uses the first-in, first-out…

A: Please find the answer to the above question below:

Q: grandpa clocks incorporated (cgi), a retailer of wall, mantle, and grandfather clocks. Assume gci…

A: Inventory includes all the items, merchandise, and raw materials that are used by the business…

Q: Several years ago, Sa Co purchased 80% of Su Co's equity share capital. Sa Co made a profit after…

A: Profit attributable to parent company includes the profit earned by is own and proportionate share…

Q: Frank Corp. owned a 90% interest in Roberts Co. Roberts frequently made sales of inventory to Frank.…

A: The objective of the question is to calculate the net income attributable to the noncontrolling…

Q: On January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On…

A: Particulars Amount DR. Amount CR. Inventory 180000 Other Current Assets 476000…

Q: Paulsen Corp acquired 70% of the voting common stock of Shipley Stores at book value equal to fair…

A: Consolidated Financial Statements is the compilation of the financial statements of holding and…

Q: P Corporation owns 90% of the common stock of S Company. During 2013, S Company made intercompany…

A: Answers P Corporation owns 90% of the common stock of S Company. Inter company Sales with Markup…

Q: What is the double entry when: During 20x0, Subsea Co will sell inventory which it bought for…

A: An unrealised inter-company profit exists only when there is a sale of goods by one company in the…

Q: P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and…

A: Intercompany Sales means sale between parent company and subsidiary company. Parent company is the…

Q: Canter Corporation acquired two inventory items at a lump-sum cost of $40,000. The acquisition…

A: Gross Profit = Sales - Cost Sales can be easily calculated by multiplying the selling price by the…

Q: a) Shahi Foods & Spices Company purchased goods for OMR 25,000 and sold 70% of such goods during the…

A: Note: As per the policy we are supposed to solve one question at a time. Kindly repost the further…

Q: P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and…

A: S sold merchandise to P for $40,000, but the cost to S was $32,000.Therefore, the profit on inter…

Q: Acker Inc. bought 40% of Howell Co. on January 1, 2020 for $576,000. The equity method of accounting…

A: Unrealized profit, December 31, 2020 = [($20,000 / $75,000) x $15,000] x 40% = $1,600

Q: Silver Corporation owns 80 percent of Billy Company's stock. At the end of 20X8, Silver and Billy…

A: Cost of goods sold (COGS) is a section on an income statement that shows the expenses a company…

Q: Oriole Corporation acquired two inventory items at a lump-sum cost of $123000. The acquisition…

A: Gross profit is an excess amount of revenue over cost of gods sold it can be calculated by following…

Q: P company paid $3,600,000 in cash, to acquire 90%of S company on January 1, 2014. The total…

Q: Whispering Winds Corporation uses a perpetual inventory system and had inventory worth $88,500 at…

A: Th balance in the inventory account or the ending inventory is the cost of goods which are not sold…

Q: Paneer owns 30% of Lassi and has done so for many years. During the year ended 31 December 20X1,…

A: Lassi sold inventory of 1 million at 50% mark up out of which 40% is still in stock cost of…

Q: P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and…

A: In case of intercompany sales, unrealised profits needs to be allocated between controlling interest…

Q: Complete the worksheet for consolidated financial statements for the year ended December 31, 2016.…

Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

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
credited to $16,000
debited to $550,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Esquire Incorporated uses the LIFO method to report its inventory. Inventory at the beginning of the year was $552,000 (23,000 units at $24 each). During the year, 86,000 units were purchased, all at the same price of $28 per unit. 88,000 units were sold during the year. Assuming an income tax rate of 25%, what is LIFO liquidation profit or loss that the company would report in a disclosure note accompanying its financial statements? LIFO liquidation profit (loss)
The Peggy Company sold merchandise to its wholly owned subsidiary, Sally Company. The following information is available: Sale price to Sally $36,000 Cost to Peggy $27,000 Sally sold 70 % of the inventory to an outside customer for $25,200. Prepare the elimination journal entry. If the other 30% was sold to an outside customer during the next year and there was not any other inter-co transactions what would be the journal entry next year?
What is the unrealized profit in inventory on Dec 31, 20X3?What is the unrealized profit in inventory on Dec 31, 20X4?What is Consolidated Inventory on Dec 31, 20X4?What is Noncontrolling interest share of Saucer's net income?
Poe, Co. uses LIFO for its inventory valuation. The original cost of Item #BB-8, the only inventory item of Poe, was $12,000. The current selling price and replacement cost are $13,500 and $9,500, respectively. Costs to sell are estimated to be $2,700. The normal profit margin is 10% of the original cost.
Patient Company holds 60% of Speedy Company stock. Patient has sold inventory to Speedy Company as follows: Percent of Sold Sales Inventory Cost to Price to Held at Speedy $203,000 $355,000 $208,000 $312,000 $120,000 $150,000 $150,000 $250,000 Year Patient Year end 2017 30% 2018 40% 2019 25% 2020 40% The following balances were included in the individual financial statements of each company for the year ended 12/31/2020: Speedy $ 5,500,000 3,800,000 $ 3,570,000 2,300,000 Patient Sales Cost of goods sold Merch. inventory 2$ 580,000 380,000 a. What will be reported as consolidated sales in the year 2020? b. What will be reported as consolidated inventory at 12/31/2020? c. What will be reported as consolidated cost of goods sold for 2020? d. Were the intra-entity sales of inventory items upstream or downstream?