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  3. 6) duke corporation owns a 70 percent equity inter

6) Duke Corporation owns a 70 percent equity interest in Salem Company, a subsidiary corporation....

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Accounting

6) Duke Corporation owns a 70 percent equity interest in Salem Company, a subsidiary corporation. During the current year, a portion of this stock is sold to an outside party. Before recording this transaction, Duke adjusts the book value of its investment account. What is the purpose of this adjustment?

7) In question (6), how would the parent record the sales transaction?

8) In question (6), how would Duke account for the remainder of its investment subsequent to the sale of this partial interest?

9) Intra-entity transfers between the component companies of a business combination are quite common. Why do these intra-entity transactions occur so frequently?

10) Barker Company owns 80 percent of the outstanding voting stock of Walden Company. During the current year, intra-entity sales amount to $100,000. These transactions were made with a gross profit rate of 40 percent of the transfer price. In consolidating the two companies, what amount of these sales would be eliminated?

11) How are intra-entity inventory gross profits created, and what consolidation entries does the presence of these gross profits necessitate?

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