EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
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Chapter 6, Problem 6.9Q
To determine
Concept Introduction:
Intercompany transaction:
Consolidated financial statements are prepared by a parent company to consolidate the assets and liabilities of the parent and its subsidiaries. There may be some transactions between these companies which are called intercompany transactions.
To Indicate: the reporting of the cost of goods sold by the consolidated entity when there have been inter-corporate sales during the period.
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Intercompany Transactions
How do unrealized intercompany inventory profits from a prior period affect the computation of consolidated net income when the inventory is resold in the current period? Is it important to know if the sale was upstream or downstream from a financial and economic perspective to the parent? Why?
State where each of the following items would appear on a multiple-step income statement:
Item
(a) Gain on sale of equipment
(b)
Cost of goods sold
(c)
Depreciation expense
(d)
Sales returns and allowances
Multiple-Step Income Statement
Section
Starting from the separate cost of goods sold of the affiliates, the consolidated cost of goods sold will be affected by all of the following, except:
A. Amortization of the excess of inventory FV over BV of the subsidiary
B. Unrealized profit on ending inventory
C. Excess of inventory FV over BV of the subsidiary at the date of acquisition
D. Realized profit on beginning inventory
Chapter 6 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
Ch. 6 - Why must inventory transfers to related companies...Ch. 6 - Why is there a need for a consolidation entry when...Ch. 6 - Prob. 6.3QCh. 6 - How do unrealized intercompany profits on a...Ch. 6 - How do unrealized intercompany profits on an...Ch. 6 - Prob. 6.6QCh. 6 - Prob. 6.9QCh. 6 - Prob. 6.10QCh. 6 - How is the amount of consolidated retained...Ch. 6 - How will the elimination of unrealized...
Ch. 6 - Prob. 6.14QCh. 6 - Is an inventory sale from one subsidiary to...Ch. 6 - Prob. 6.16QCh. 6 - Prob. 6.1.1ECh. 6 - Prob. 6.1.2ECh. 6 - MultipleChoice Questions on Intercompany Inventory...Ch. 6 - MultipleChoice Questions on Intercompany Inventory...Ch. 6 - Prob. 6.1.5ECh. 6 - Prob. 6.1.6ECh. 6 - Prob. 6.3.1ECh. 6 - Prob. 6.3.2ECh. 6 - Prob. 6.3.3ECh. 6 - Prob. 6.4.1ECh. 6 - Prob. 6.4.2ECh. 6 - Prob. 6.4.3ECh. 6 - Prob. 6.4.4ECh. 6 - Prob. 6.5.1ECh. 6 - Prob. 6.5.2ECh. 6 - Prob. 6.5.3ECh. 6 - Prob. 6.7ECh. 6 - Prob. 6.8ECh. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Prob. 6.11ECh. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Prob. 6.15ECh. 6 - Prior-Period Inventory Profits Home Products...Ch. 6 - Prob. 6.17PCh. 6 - Prob. 6.18PCh. 6 - Prob. 6.19PCh. 6 - Prob. 6.20PCh. 6 - Prob. 6.21PCh. 6 - Prob. 6.22PCh. 6 - Prob. 6.24PCh. 6 - Prob. 6.26PCh. 6 - Prob. 6.27PCh. 6 - Prob. 6.28PCh. 6 - Prob. 6.29PCh. 6 - Prob. 6.30PCh. 6 - Prob. 6.31PCh. 6 - Prob. 6.33PCh. 6 - Prob. 6.34PCh. 6 - Prob. 6.35APCh. 6 - Prob. 6.36AP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- for the following intercompany transaction state the principle to be used in accounting for intercompany gains on current and future consolidated income statements: Gains on the sale of landarrow_forwardHow are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in a consolidated statement of cash flows?arrow_forwardwhy would a corporate entity mark up inventory when selling on an intercompany basis?arrow_forward
- In accounting for by-products, when the by-products are sold for more than the estimated sales value, the difference is: a. credited to Gain or Loss on Sale of By-Product b. debited to Gain or Loss on Sale of By-Product c. immaterial, so not recorded. d. credited to By-Product Inventory.arrow_forwardWhich item is not included in an S corporation's nonseparately computed income? a. Net sales. b. Cost of goods sold. c. Dividends received. d. Depreciation recapture. e. All of these are included in non-separately computed income.arrow_forwardThe sale of inventory items by a parent company to an affiliated company a. enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. b. affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. c. does not result in consolidated income until the merchandise is sold to outside entities. d. does not require a working paper adjustment if the merchandise was transferred at cost.arrow_forward
- Consider each of the following independent situations. Should a company report the goods in its inventory? (b) Goods received by the company on consignmentarrow_forwardS1: The amount of intercompany profit subject to elimination is calculated on the basis of the buyer's affiliate's gross profit rate stated as a percentage of cost. S2: Intercompany sales of inventory necessitate adjustments to the calculation of the distribution of income to the controlling interest. O Only S1 is correct. O Only S2 is correct. O Both statements are correct. O Both statements are incorrect.arrow_forwardThe material sale of inventory items by a parent company to an affiliated company a. Affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. b. Enters the consolidated revenue computation only if the transfer was the result of arm’s length bargaining c. Does not result in consolidated income until the merchandise is sold to outside parties. d. Does not require a working paper adjustment if the merchandise was transferred at cost.arrow_forward
- Income arises from the following except: A. sale of merchandise to customers B. rendering of services C. use of entity resources by others D. Disposal of assets other than inventory E. answer not givenarrow_forwardWill the decision about the transfer price affect consolidated net income? Which method would be easiest for the company's accountant to administer? As the company's accountant, what advice would you give to these officials?arrow_forwardWhich of the following levels of profitability in a multiple-step income statement represents revenues from the sale of inventory less the cost of that inventory? a. Gross profit. b. Operating income. c. Income before income taxes. d. Net income.arrow_forward
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