
To determinbe:.The type of errors that would be there on the consolidated income statement and
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.

Explanation of Solution
Errors that would be there in the consolidated income statement and balance sheet in the absence of consolidation adjustments are listed as follows:
Unsold stock in the balance sheet would incude a profit of $3,000
- Sales figures and cost of goods sold figure of the consolidated income statement would show inflated values. Sales figures would include sales made to subsidiary, as well as sales made to an outside party. Similarly, COGS would include cost to parent as well cost to subsidiary. This would result in decrease of gross profit percentage.
Therefore sales made by seller to buyer should be eliminated, COGS of the buyer should be eliminated, profit component of COGS remaining unsold is eliminated and profit included in the unsold inventory should be eliminated.
Want to see more full solutions like this?
Chapter 4 Solutions
Advanced Accounting
- Can you help me solve this financial accounting question using valid financial accounting techniques?arrow_forwardI need the correct answer to this financial accounting problem using the standard accounting approach.arrow_forwardPlease provide the solution to this financial accounting question using proper accounting principles.arrow_forward
- Can you explain the correct approach to solve this financial accounting question?arrow_forwardI need help with this financial accounting question using the proper financial approach.arrow_forwardOcean Corp. has a single class of shares. As its year ended December 31, 2025, the company had 5,000,000 shares issued and outstanding. On the stock exchange, these shares were trading at around $7. In the company's accounts, these shares had a value of $50,000,000. The equity accounts also show $650,000 of contributed surplus from previous repurchases of shares. On January 15, 2026, Ocean repurchased and cancelled 250,000 shares at a cost of $7 per share. Later in the year, on August 20, the company repurchased and cancelled a further 475,000 shares at a cost of $14 per share. Required Record the journal entries for the two share transactions in 2026.arrow_forward
- Financial Accountingarrow_forwardIn 2027 Palm Tree Inc. declared $1,000,000 in cash dividends. Its capital structure includes 300,000 common shares; 200,000 cumulative preferred shares "A" each entitled to an annual dividend of $1.00; and 50,000 non-cumulative preferred shares "B" each entitled to an annual dividend of $3.00. The prescribed dividends on both series of preferred shares were last declared and paid in 2025. Required Use the following facts to determine how much each of the three classes of shares receives of the $1,000,000 cash dividend.arrow_forwardI am looking for the correct answer to this financial accounting question with appropriate explanations.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





