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. No Event General Journal Debit Credit A Inventory 150,000 Cash (Accounts payable) 150,000 B 2 Cash (Accounts receivable) Sales 60,000 60,000 C 3 Cost of goods-sold Inventory Journal entries recorded by Plump Corporation: Answer is complete but not entirely correct. No Event General Journal A Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C D 3 Cost of goods sold Inventory Income from Slim Investment in Slim 90 00 40,000 40,000 Debit Credit 60,000 60,000 90,000 90,000 45,000 45,000 5,000 x 5,000 Prev Next
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. No Event General Journal Debit Credit A Inventory 150,000 Cash (Accounts payable) 150,000 B 2 Cash (Accounts receivable) Sales 60,000 60,000 C 3 Cost of goods-sold Inventory Journal entries recorded by Plump Corporation: Answer is complete but not entirely correct. No Event General Journal A Inventory Cash (Accounts payable) B 2 Cash (Accounts receivable) Sales C D 3 Cost of goods sold Inventory Income from Slim Investment in Slim 90 00 40,000 40,000 Debit Credit 60,000 60,000 90,000 90,000 45,000 45,000 5,000 x 5,000 Prev Next
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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.
No
Event
General Journal
Debit
Credit
A
Inventory
150,000
Cash (Accounts payable)
150,000
B
2
Cash (Accounts receivable)
Sales
60,000
60,000
C
3
Cost of goods-sold
Inventory
Journal entries recorded by Plump Corporation:
Answer is complete but not entirely correct.
No
Event
General Journal
A
Inventory
Cash (Accounts payable)
B
2
Cash (Accounts receivable)
Sales
C
D
3
Cost of goods sold
Inventory
Income from Slim
Investment in Slim
90
00
40,000
40,000
Debit
Credit
60,000
60,000
90,000
90,000
45,000
45,000
5,000 x
5,000
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