Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 1, Problem 19P
To determine
Introduction: When related companies trade with each other, sales between them require special accounting treatment, because a business cannot recognize profit through business activities with itself. When an investor company sells inventory to its investee company, the investment company can defer profit on such inventory until it is sold to an unrelated party.
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Camille, Inc., sold $147,000 in inventory to Eckerle Company during 2020 for $245,000. Eckerle resold $109,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming that Camille owns 34 percent of Eckerle and applies the equity method, what journal entry is recorded at the end of 2020 to defer the intra-entity gross profit?
Camille, Inc., sold $130,000 in inventory to Eckerle Company during 2020 for $250,000. Eckerle resold $89,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming that Camille owns 20 percent of Eckerle and applies the equity method, what journal entry is recorded at the end of 2020 to defer the intra-entity gross profit? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)
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Chapter 1 Solutions
Advanced Accounting
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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- Camille, Incorporated, sold $147,000 in inventory to Eckerle Company during 2023 for $245,000. Eckerle resold $109,000 of this merchandise in 2023 with the remainder to be disposed of during 2024. Required: Assuming that Camille owns 34 percent of Eckerle and applies the equity method, what journal entry is recorded at the end of 2023 to defer the intra-entity gross profit? Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. 1.Record the entry at the end of 2023 to defer unrealized gross profit.arrow_forwardEmad LLC's Income Statement shows OMR 102,600 profit for the year 2020. The following information are provided to arrive the taxable income. - The actual value of closing inventory was OMR 82,700, it is recorded as OMR 82,200. - Provision for bad debts of OMR 1,500 has been included to calculate the above profit. - The firm earned dividend income of OMR 12,000. Since, the dividend income is not taxable the accountant reduced same amount from business income. - The company invested OMR 20,000 in equity share during this year. - Depreciation of a pre-fabricated building worth of OMR 80,000 was charged at 4%. - Salary OMR 8800 was paid for 11 months was included to arrive at the profit. Accountant did not report the outstanding salary. - The firm incurred a loss of OMR 24,600 in the year 2015 out of which OMR 20,800 has been written off so far. - Donation paid to an approved trust OMR 4,200 which is less than 3% of gross income. - Bad debts of previous years OMR 1,500 recovered in this…arrow_forwardEmad LLC's Income Statement shows OMR 102,600 profit for the year 2020. The following information are provided to arrive the taxable income. Ø The actual value of closing inventory was OMR 82,700, it is recorded as OMR 82,200. Ø Provision for bad debts of OMR 1,500 has been included to calculate the above profit. Ø The firm earned dividend income of OMR 12,000. Since, the dividend income is not taxable the accountant reduced same amount from business income. Ø The company invested OMR 20,000 in equity share during this year. Ø Depreciation of a pre-fabricated building worth of OMR 80,000 was charged at 4%. Ø Salary OMR 8800 was paid for 11 months was included to arrive at the profit. Accountant did not report the outstanding salary. Ø The firm incurred a loss of OMR 24,600 in the year 2015 out of which OMR 20,800 has been written off so far. Ø Donation paid to an approved trust OMR 4,200 which is less than 3% of gross income. Ø Bad debts of previous years OMR 1,500 recovered in this…arrow_forward
- L Company owns 30% of S Company’s common stock which gives it the ability to apply significant influence and thus uses the equity method of accounting for its investment. During 2020 L Company sold inventory costing $120,000 to S company for $200,000. Also during 2020 S company resold $85,000 of this inventory to third parties. What journal entry would L Company make at the end of 2020 to defer the intra-entity gross profit?arrow_forwardTally, Inc., sold $200,000 in inventory to Merna Company during 2015 for $250,000. Mernal resold $175,000 of this merchandise in 2015 with the remainder to be disposed of during 2016. Assuming that Tally owns 40 percent of Merna and applies the equity method, what journal entry is recorded at the end of 2015 to defer the unrealized gross profit?arrow_forwardX 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.arrow_forward
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- Partner, Inc. owns 80% of Senior, Inc. During 2020, Partner sold goods with a 40% gross profit to Senior. Senior sold all of these goods in 2020. For 2020 consolidated financial statements, how should the summation of Partner and Senior income statement items be adjusted? A. No adjustment is necessary since the inventory was sold 100% to outsider. B. Sales and cost of goods sold should be reduced by the intercompany sales. C. Sales and cost of goods sold should be reduced by 80% of the intercompany sales. D. Net income should be reduced by 80% of the gross profit on intercompany sales.arrow_forwardOn January 1, 2020, the Pacita Corporation purchased equity securities to be held for trading purposes for P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. The securities had fair values at December 31, 2020 and 2021, respectively: P1,750,000 and P2,100,000. No securities were sold during 2021. What amount of unrealized gain or loss should be reported in the 2021 profit or loss section of the statement of comprehensive income? P200,000 loss P250,000 loss P350,000 gain P100,000 gain а. b. с. d.arrow_forwardTala Isabel is the sole owner and operator of Star Service Company. As of the end of its accounting penod, December 31, 2019, Star Company has assets of P925.000 and liabilities of P285.000. During the year 2020, Tala Isabel invested an additional P50.000 and withdrew P30,000 from the business. What is the amount of net income during 2020, assuming that as of December 31, 2021, assets were P980.000 and liabilities were P255.0007 Kors Flower Shop reported total revenues of P184 000 for 2021 as well as Total Liabilities as of December 31, 2021-P240.000//2021 Net loss-P38.000// 2021 Total cash payments-P104.000 The company's total expenses must have beenarrow_forward
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