X Inc. owns 70% of Y Inc. During 2020, X Inc. sold inventory to Y for $10,000. Half of this inventory remained in Y's warehouse at year end. Y Inc. sold inventory to X Inc. for $5,000. 40% of this intentory remained in X's warehouse at year end. The gross profit percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the cost method to account for its investment in Y Inc. What effect (if any) would the unrealized profits on the above intercompany sales have on the non-controlling interest account on the consolidated balance sheet? There would be a decrease to the non-controlling interest account for the amount of $120 There would be a decrease to the non-controlling interest account for the amount of $80 There would be a decrease to the non-controlling interest account for the amount of $400 There would be no impact on the non-controlling interest account.
X Inc. owns 70% of Y Inc. During 2020, X Inc. sold inventory to Y for $10,000. Half of this inventory remained in Y's warehouse at year end. Y Inc. sold inventory to X Inc. for $5,000. 40% of this intentory remained in X's warehouse at year end. The gross profit percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the cost method to account for its investment in Y Inc. What effect (if any) would the unrealized profits on the above intercompany sales have on the non-controlling interest account on the consolidated balance sheet? There would be a decrease to the non-controlling interest account for the amount of $120 There would be a decrease to the non-controlling interest account for the amount of $80 There would be a decrease to the non-controlling interest account for the amount of $400 There would be no impact on the non-controlling interest account.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:X Inc. owns 70% of Y Inc. During 2020, X Inc. sold inventory to Y for $10,000. Half of
this inventory remained in Y's warehouse at year end. Y Inc. sold inventory to X Inc.
for $5,000. 40% of this intentory remained in X's warehouse at year end. The gross
profit percentage on sales is 20% for both companies. Unless otherwise stated,
assume X Inc. uses the cost method to account for its investment in Y Inc.
What effect (if any) would the unrealized profits on the above intercompany sales
have on the non-controlling interest account on the consolidated balance sheet?
There would be a decrease to the non-controlling interest account for the
amount of $120
There would be a decrease to the non-controlling interest account for the
amount of $80
There would be a decrease to the non-controlling interest account for the
amount of $400
There would be no impact on the non-controlling interest account.
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