This document contains a multiple choice problem and classroom discussion questions about consolidated financial statements. It provides:
1) Sales, cost of sales, and intercompany transaction figures for a parent company and subsidiary in order to calculate their consolidated financial statements.
2) A calculation of the unrealized profit in ending inventory between the two companies from intercompany sales during the year.
3) The solutions to the classroom discussion questions about consolidating the companies' financial statement line items.
This document contains a multiple choice problem and classroom discussion questions about consolidated financial statements. It provides:
1) Sales, cost of sales, and intercompany transaction figures for a parent company and subsidiary in order to calculate their consolidated financial statements.
2) A calculation of the unrealized profit in ending inventory between the two companies from intercompany sales during the year.
3) The solutions to the classroom discussion questions about consolidating the companies' financial statement line items.
This document contains a multiple choice problem and classroom discussion questions about consolidated financial statements. It provides:
1) Sales, cost of sales, and intercompany transaction figures for a parent company and subsidiary in order to calculate their consolidated financial statements.
2) A calculation of the unrealized profit in ending inventory between the two companies from intercompany sales during the year.
3) The solutions to the classroom discussion questions about consolidating the companies' financial statement line items.
2) PROBLEM 1: MULTIPLE CHOICE - THEORY 1. A 6. B 2. C 7. B 3. A 8. B 4. A 9. C 5. B 10. A PROBLEM 2: FOR CLASSROOM DISCUSSION 1. S
OR CLASSROOM DISCUSSION 1. Solutions: Requirement (a): Sales of Parent 1,000,000 Sales of Subsidiary 700,000 Less: Intercompany sale y 700,000 Less: Intercompany sales during the year (38,000 + 40,000) (78,000) Consolidated sales 1,622,000 Requirement (b): The unrea ,000 Requirement (b): The unrealized profits in ending inventory are computed as uted as follows: follows: Downstream Upstream Total ws: Downstream Upstream Total Sale price of intercompany sale 38,000 Cost of intercompany intercompany sale (20,000) (20,000) Profi mpany sale (20,000) (20,000) Profit from intercompany sale 18,000 8,000a Multiply by: Unsold portion as of yr.- end (9.5/38) 3/4 Unrealiz s of yr.- end (9.5/38) 3/4 Unrealized gross profit 4,500 6,00 0 10,500 a (40,000 x 20%) = 8,000 Cost of sales of Parent 400,000 Cost of s sales of Parent 400,000 Cost of sales of Subsidiary 350,000 Less: Intercompany sales during the yr. (38,000 + 40,000) (78,000 ) Add: Unre 000 + 40,000) (78,000 ) Add: Unrealized profit in ending inventory inventory 10,500 1