GSLC Forum Information

Course ID : ACCT6083
Course Name : Advanced Accounting
Teaching Week : 6 – Session 1 GSLC
Date of Class : Monday, 19 October 2020
Date of Latest Respond : Sunday, 25 October 2020 (Mid-day - 11.59 AM)
Book Reference : Debra C. Jeter, Paul K. Chaney. (2015). Advanced Accounting.
th
6 Edition. Wiley. New Jersey.

Dear class,

Pada minggu ke-enam di semester ganjil ini, ACCT6083 membahas tentang Chapter 6 yaitu
“Elimination of Unrealized Profit on Intercompany Sales of Inventory”. Untuk sesi pertama
GSLC minggu ini, berikut latihan soal yang bisa kalian kerjakan dari buku Jeter (2015), dan
pertanyaannya terfokus kepada upstream dan downstream sales in general. Selamat
mengerjakan!

Problem 6-1.
Why is it important to distinguish between upstream and downstream sales in the analysis of
intercompany profit eliminations? Please elaborate the difference.

Problem 6-2. Downstream Sales

Peer Company owns 80% of the common stock of Seacrest Company. Peer Company sells
mer- chandise to Seacrest Company at 25% above its cost. During 2011 and 2012 such sales
amounted to $265,000 and $475,000, respectively. The 2011 and 2012 ending inventories of
Seacrest Company included goods purchased from Peer Company for $125,000 and $170,000,
respectively.
Peer Company reported net income from its independent operations (including inter-
company profit on inventory sales to affiliates) of $450,000 in 2011 and $480,000 in 2012.
Seacrest reported net income of $225,000 in 2011 and $275,000 in 2012 and did not declare
dividends in either year. There were no intercompany sales prior to 2011.

Required:
a. Prepare in general journal form all entries necessary in the consolidated financial
statements workpapers to eliminate the effects of the intercompany sales for each of
the years 2011 and 2012.
b. Calculate the amount of noncontrolling interest to be deducted from consolidated
income in the consolidated income statements for 2011 and 2012.
c. Calculate controlling interest in consolidated income for 2012.

Adelia Yulma Budiarto, S.A, MSc. – ACCT6083

Problem 6-3. Upstream Sales
Shell Company, an 85% owned subsidiary of Plaster Company, sells merchandise to Plaster
Company at a markup of 20% of selling price. During 2011 and 2012, intercompany sales
amounted to $442,500 and $386,250, respectively. At the end of 2011, Plaster had one-half
of the goods that it purchased that year from Shell in its ending inventory. Plaster’s 2012
ending inventory contained one-fifth of that year’s purchases from Shell. There were no
intercompany sales prior to 2011.
Plaster had net income in 2011 of $750,000 from its own operations and in 2012 its
independent income was $780,000. Shell reported net income of $322,500 and $335,400 for
2011 and 2012, respectively.

Required:
a. Prepare in general journal form all entries necessary on the consolidated financial
statement workpapers to eliminate the effects of the intercompany sales for each
of the years 2011 and 2012.
b. Calculate the amount of noncontrolling interest to be deducted from consolidated
income in the consolidated income statement for 2012.
c. Calculate controlling interest in consolidated income for 2012.

Adelia Yulma Budiarto, S.A, MSc. – ACCT6083