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Test 2 Cheat Sheet
Test 2 Cheat Sheet
Test 2 Cheat Sheet
The results of operations for the year 2002 for the two companies are as follows: (a.) Give the entry needed in a three-part consolidation workpaper prepared at the end of 2002 to
eliminate the effects of the intercompany inventory transfer.
2002 operating income for Platte $1,750,000
(b.) Compute 2002 consolidated net income.
2002 net income for River 1,100,000
(c.) Compute the amount of income assigned to the noncontrolling and controlling
Total $2,850,000
interest in 2002.
ABC Corporation owns 75 percent of XYZ Company's voting shares. During 2008, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for
$90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 2008, and sold the remainder in early 2009 for $130 each. Both
companies use perpetual inventory systems
Based on the information given above, what amount of cost of goods sold did ABC record in 20X8? = $79*35000 = $2,765,000
Based on the information given above, what amount of cost of goods sold did XYZ record in 20X8? = $90*18,000 = 1,620,000
Based on the information given above, what amount of cost of goods sold must be reported in the consolidated income statement for 20X8? = $79*18000 =
$1,422,000
Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 2008? =
During 2008, ABC produced and sold 35000 chairs @ $90 to XYZ, out of which 18000 were sold to unaffiliated companies for $117. The cost of goods must be
eliminated from consolidated income statement is $ 2,963,000 i.e 79 production cost * 35000 chairs, this cost is common in both companies , so one cost should be
deleted and profit raised by affiliated companies mutually should also be deleted.
Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 2009? A. $187,000 B.
$221,000 C. $1,422,000 D. $2,963,000 with explanation
During 2009, only profit made by ABC on chairs sold in 2009 should be deleted been common in both affiliated companies. So, $187000 should be eliminated from
the consolidated income statement for 2009.