Chapter 8, Problem 8.12AE

a.

To determine

Introduction: Intragroup transactions are the transactions that occur between two companies in the industry. Instead of showing separate financial statement for two companies a single consolidated financial statement is prepared which constitute assets, liabilities, expenses, incomes of both companies.

The amount of gain or loss reported in B’s Income Statement

b.

To determine

Introduction: Consolidation is the process of summarizing and combining the financial statement of two companies into one. Consolidated net income is the sum total of net income of the holding company and net income of its subsidiary companies after deducting unrealized gain in inventories and income from intra-group transactions of the companies.

The amount of gain or loss for the year 20X6 for parent company.

c.

To determine

Introduction: Net income is a company's total profits after deducting all business expenses. Net income (NI) is also called net earnings. It is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses.

To prepare: Calculate amount of gain or loss for the year 20X6 for parent company.

d.

To determine

Introduction: In preparing the consolidated financial statement, the sum owed by one company to the other company within the group should be eliminated, for intercompany transactions, and for this, the parent company eliminates the effect of intercompany transactions by making eliminating entries.

To prepare: Eliminating entries to remove effect of inter-corporate ownership of bonds in 20X6

e.

To determine

Introduction: In preparing the consolidated financial statement, the sum owed by one company to the other company within the group should be eliminated, for intercompany transactions, and for this, the parent company eliminates the effect of intercompany transactions by making eliminating entries.

To prepare: Worksheet eliminating entries to remove effect of inter-corporate ownership of bonds in 20X7.

f.

To determine

Introduction: Consolidation is the process of summarizing and combining the financial statement of two companies into one. Consolidated net income is the sum total of net income of the holding company and net income of its subsidiary companies after deducting unrealized gain in inventories and income from intra-group transactions of the companies.

To prepare: Calculate amount of gain or loss for the year 20X6 for parent company.