Chapter 6, Problem 6.28P

(a)

To determine

Introduction: Sales refer to a transaction between two parties in which one party sells a product or a service and another party purchases those goods and services in exchange for a consideration, usually monetary in nature.

The amount reported in the consolidated income statement as sales.

Answer to Problem 6.28P

Sales to be recorded in the consolidated income statement is $790,000

Explanation of Solution

Calculation of sales

Particulars	Amount (in $)	Amount (in $)
Reported sales of B		660,000
Reported sales of H		510,000
		1,170,000
Intercompany sales by B	140,000
Intercompany sales by H	240,000	(380,000)
Sales reported on consolidated income statement		790,000

(b)

To determine

Introduction: The cost of goods sold refers to the cost of acquisition or manufacturing of goods that a company sells during a particular period. The cost of goods sold includes the cost of materials and labor used in the manufacturing and other associated costs.

The amount reported in the consolidated income statement as cost of goods sold

Answer to Problem 6.28P

Cost of goods sold to be recorded in the consolidated income statement is $536,429

Explanation of Solution

Calculation of cost of goods sold

Particulars	B (in $)	H (in $)
Seles reported	660,000	510,000
Ratio of cost to sales price	1.4	1.2
Cost of goods sold	471,429	425,000
Amount to be eliminated	(128,000)	(232,000)
Cost of goods sold adjusted	(343,429)	(193,000)
Cost of goods sold		536,429

(c)

To determine

Introduction: The consolidated income is the difference between the sum of the total operating income of the parent company and the net income of the subsidiary and the unrealized inventory profits of the two. The income assigned to controlling interest is the difference between income assigned to non-controlling interest and the consolidated net income.

The amount reported as consolidated net income and income assigned to the controlling interest.

Answer to Problem 6.28P

The consolidated net income is $70,000

The income assigned to controlling interest is $67,600

Explanation of Solution

Consolidated net income:

Particulars	Amount (in $)	Amount (in $)
Operating income of B	70,000
Net income of H	20,000
Total income		90,000
Less: unrealized inventory profits of B		(12,000)
unrealized inventory profits of H		(8,000)
Consolidated net income		70,000

Income assigned to controlling interest:

Particulars	Amount (in $)
Consolidated net income	70,000
Less: income assigned to non- controlling interest $\left(20,000-8,000\right)\times 20\%$	(2,400)
Income assigned to controlling interest	67,600

(d)

To determine

Introduction: Inventory refers to the goods that a business holds with the ultimate goal of resale. It includes only the finished goods or unfinished goods to be ultimately used in the production process. It is classified as a current asset in the balance sheet of the company.

The inventory balance reported in the consolidated balance sheet for 20X8

Answer to Problem 6.28P

The amount of inventory to be reported in the 20X8 balance sheet is $70,000

Explanation of Solution

Inventory:

Particulars	Amount (in $)	Amount (in $)
Inventory reported by B	48,000
Unrealized profits	(8,000)	40,000
Inventory reported by H	42,000
Unrealized profit	(12,000)	30,000
Inventory as on December, 20X5		70,000