Advanced Accounting
Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
Question
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Chapter 1, Problem 23P

a.

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.

The difference between downstream transfers and upstream transfers.

b.

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.

If the direction of inter-entity transfer affects the application of the equity method.

c.

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.

The computation of inter-entity gross profit deferral in the application of the equity method.

d.

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.

The computation of equity income to be recognized in 2020, and entry made to record this income.

e.

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.

The computation of equity income to be recognized in 2021.

f.

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.

The computation of equity income to be recognized in 2021.

g.

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.

The effect on the application of the equity method if none of the transferred inventory remained at the end of 2020.

h.

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.

The effect of inter-entity transfers on S’s reporting.

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Use the following to answer questions 8 through 10: On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021.  Jazzie’s year ends on December 31st.  The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%.   In the 2021 income statement for Jazzie Co., they would report after tax income from discontinued operations of: Group of answer choices $9.2 million. $13.2 million. $22 million. $26 million.
. On July 1, 2021, A, B, and C formed a joint venture for the sale of merchandise. A was designated as the n=managing participant. Profits or losses are to be divided as follows: A – 50%; B-25% and C-25%. On October 1, 2021, though the joint venture is still uncompleted, the participant agreed to recognize profit or loss on the venture to date. The cost of inventory on hand is determined at P25,000. The joint venture account has a debit balance of P15,000 before distribution of profit and loss. No separate set of books is maintained for the joint venture and the participants record in their individual books all venture transactions. a. The joint venture profit (loss) on October 1, 2021 is a. P10,000 b. P25,000 c. (P15,000) d. None . Using the sme information above and the joint venture account has a venture profit (loss) is а. (Р55,000) credit balance of P30,000, the joint b. P55,000 с. (Р5,000) d. P5,000
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