Problem 2 Pawn Company holds 70% of Sell Company stock. Pawn has sold inventory to Sell Company as follows: Year 2019 2020 2021 2022 Sales Price to Sell $355,000 $312,000 $360,000 $450,000 $300,000 $500,000 Cost to Pawn $203,000 $208,000 Percent of Sold Inventory Held at Year end Sales Cost of goods sold Merch. inventory 30% 40% 35% 20% The following balances were included in the individual financial statements of each company for the year ended 12/31/2022: Pawn Sell 3,700,000 $6,500,000 $ 3,470,000 2,200,000 $ 590,000 350,000

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem 2
Pawn Company holds 70% of Sell Company stock.
Pawn has sold inventory to Sell Company as follows:
Year
2019
2020
2021
2022
Sales
Price to
Cost to
Pawn
Sell
$203,000
$355,000
$208,000 $312,000
$360,000
$450,000
$300,000 $500,000
Percent
of Sold
Inventory
Held at
Year end
30%
40%
35%
20%
The following balances were included in the individual
financial statements of each company for the year ended
12/31/2022:
Pawn
Sell
3,700,000
Sales
$6,500,000
Cost of goods sold
Merch. inventory
$ 3,470,000 2,200,000
$ 590,000 350,000
a. What will be reported as consolidated sales in the year 2022?
b. What will be reported as consolidated inventory at 12/31/2022?
c. What will be reported as consolidated cost of goods sold for 2022?
d. Were the intra-entity sales of inventory items upstream or
downstream?
Transcribed Image Text:Problem 2 Pawn Company holds 70% of Sell Company stock. Pawn has sold inventory to Sell Company as follows: Year 2019 2020 2021 2022 Sales Price to Cost to Pawn Sell $203,000 $355,000 $208,000 $312,000 $360,000 $450,000 $300,000 $500,000 Percent of Sold Inventory Held at Year end 30% 40% 35% 20% The following balances were included in the individual financial statements of each company for the year ended 12/31/2022: Pawn Sell 3,700,000 Sales $6,500,000 Cost of goods sold Merch. inventory $ 3,470,000 2,200,000 $ 590,000 350,000 a. What will be reported as consolidated sales in the year 2022? b. What will be reported as consolidated inventory at 12/31/2022? c. What will be reported as consolidated cost of goods sold for 2022? d. Were the intra-entity sales of inventory items upstream or downstream?
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