Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various health stores during the year. Required: a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale of gnarl roots. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Journal entries recorded by Slim Company: Answer is complete and correct. General Journal Debit Credit 150,000 150,000 No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C 3 Cost of goods sold Inventory Journal entries recorded by Plump Corporation: Answer is complete but not entirely correct. General Journal No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales D D 3 Cost of goods sold Inventory 60,000 60,000 40,000 40.000 Debit Credit 60,000 60.000 90,000 90,000 45.000 45.000 Income from Slim 5,000 × Investment in Slim 5.000
Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various health stores during the year. Required: a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale of gnarl roots. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Journal entries recorded by Slim Company: Answer is complete and correct. General Journal Debit Credit 150,000 150,000 No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C 3 Cost of goods sold Inventory Journal entries recorded by Plump Corporation: Answer is complete but not entirely correct. General Journal No Event A 1 Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales D D 3 Cost of goods sold Inventory 60,000 60,000 40,000 40.000 Debit Credit 60,000 60.000 90,000 90,000 45.000 45.000 Income from Slim 5,000 × Investment in Slim 5.000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
I need help with part D under
Transcribed Image Text:Plump Corporation holds 60 percent ownership of Slim Company. Each year, Slim purchases large quantities of a gnarl root used in
producing health drinks. Slim purchased $150,000 of roots in 20X7 and sold $40,000 of these purchases to Plump for $60,000. By the
end of 20X7, Plump had resold all but $15,000 of its purchase from Slim. Plump generated $90,000 on the sale of roots to various
health stores during the year.
Required:
a. Prepare the journal entries recorded by Plump and Slim during 20X7 relating to the initial purchase, intercorporate sale, and resale
of gnarl roots.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Journal entries recorded by Slim Company:
Answer is complete and correct.
General Journal
Debit
Credit
150,000
150,000
No
Event
A
1
Inventory
Cash (Accounts payable)
B
2
Cash (Accounts receivable)
Sales
C
3
Cost of goods sold
Inventory
Journal entries recorded by Plump Corporation:
Answer is complete but not entirely correct.
General Journal
No
Event
A
1
Inventory
Cash (Accounts payable)
B
2
Cash (Accounts receivable)
Sales
D
D
3
Cost of goods sold
Inventory
60,000
60,000
40,000
40.000
Debit
Credit
60,000
60.000
90,000
90,000
45.000
45.000
Income from Slim
5,000 ×
Investment in Slim
5.000
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