During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation...

50.1K

Verified Solution

Question

Accounting

During the year ended December 31, 2019, Parent Company (theparent) sold merchandise to Subsidiary Corporation (a 90%-ownedsubsidiary) for a price of $32,340, at a markup of 32% of cost.Subsidiary sold merchandise acquired from Parent to outsidercustomers for $38,500 during 2019. Included in Subsidiary’s January1, 2019, inventories were goods acquired from Parent at a billedprice of $3,036 and included in Subsidiary’s December 31, 2019,inventories were goods acquired from Parent at a billed price of$2,310.
(i)         Preparethe working paper eliminating entries (in journal entry format)related to the intercompany sale of merchandise for the year endedDecember 31, 2019.
(ii)        Show how theworking paper eliminating entry in part (i) adjusts cost of goodssold and ending inventory to the correct consolidated balances.
  Parent

  Subsidiary

Adjustments & Eliminations
Consolidated
Debits
Credits
Cost of goods sold
Inventory
(iii)       How (increase ordecrease and the amount) is Parent’s 2019 equity in income ofSubsidiary affected by the intercompany sale of merchandise?

Answer & Explanation Solved by verified expert

3.9 Ratings (670 Votes)

Answers i ELIMINATION ENTRIES December 312019 Transaction General Journal Debit Credit a Sales 32340 Cost of goods sold 32340 To eliminate intercompany sale in 2019 b Retained Earnings 112019 736 Cost of See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

During the year ended December 31, 2019, Parent Company (theparent) sold merchandise to Subsidiary Corporation (a 90%-ownedsubsidiary) for a price of $32,340, at a markup of 32% of cost.Subsidiary sold merchandise acquired from Parent to outsidercustomers for $38,500 during 2019. Included in Subsidiary’s January1, 2019, inventories were goods acquired from Parent at a billedprice of $3,036 and included in Subsidiary’s December 31, 2019,inventories were goods acquired from Parent at a billed price of$2,310.(i) Preparethe working paper eliminating entries (in journal entry format)related to the intercompany sale of merchandise for the year endedDecember 31, 2019.(ii) Show how theworking paper eliminating entry in part (i) adjusts cost of goodssold and ending inventory to the correct consolidated balances. Parent Subsidiary Adjustments & EliminationsConsolidatedDebitsCreditsCost of goods soldInventory(iii) How (increase ordecrease and the amount) is Parent’s 2019 equity in income ofSubsidiary affected by the intercompany sale of merchandise?

	Parent	Subsidiary	Adjustments & Eliminations		Consolidated
	Parent	Subsidiary	Debits	Credits	Consolidated
Cost of goods sold
Inventory