ACG4803 - Chapter 5

Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset TransactionsChapter 05 Consolidated Financial Statements - Intra-Entity Asset Transactions Multiple Choice Questions 1. On November 8, 2011, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized? A. Proportionately over a designated period of years. B. When Wood Co. sells the land to a third party. C. No gain can be recognized. D. As Wood uses the land. E. When Wood Co. begins using the land productively. Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011. Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. 2. How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from Stendall to Edgar? A. Consolidated cost of goods sold would have remained $2,140,000. B. Consolidated cost of goods sold would have been more than $2,140,000 because of the controlling interest in the subsidiary. C. Consolidated cost of goods sold would have been less than $2,140,000 because of the noncontrolling interest in the subsidiary. D. Consolidated cost of goods sold would have been more than $2,140,000 because of the noncontrolling interest in the subsidiary. E. The effect on consolidated cost of goods sold cannot be predicted from the information provided. 5-1 Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 3. How would noncontrolling interest in net income have differed if the transfers had been for the same amount and cost, but from Stendall to Edgar? A. Noncontrolling interest in net income would have decreased by $6,000. B. Noncontrolling interest in net income would have increased by $24,000. C. Noncontrolling interest in net income would have increased by $20,000. D. Noncontrolling interest in net income would have decreased by $18,000. E. Noncontrolling interest in net income would have decreased by $56,000. 4. On January 1, 2011, Race Corp. acquired 80% of the voting common stock of Gallow Inc. During the year, Race sold to Gallow for $450,000 goods which cost $330,000. Gallow still owned 15% of the goods at year-end. Gallow's reported net income was $204,000, and Race's net income was $806,000. Race decided to use the equity method to account for this investment. What was the noncontrolling interest's share of consolidated net income? A. $3,600. B. $22,800. C. $30,900. D. $32,900. E. $40,800. 5. Webb Co. acquired 100% of Rand Inc. on January 5, 20011. During 2011, Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000. Rand still owned 40% of the goods at the end of the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold? A. $17,200,000. B. $15,040,000. C. $14,800,000. D. $16,960,000. E. $14,560,000. 5-2 Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 6. Gentry Inc. acquired 100% of Gaspard Farms on January 5, 2010. During 2010, Gentry sold Gaspard Farms for $625,000 goods which had cost $425,000. Gaspard Farms still owned 12% of the goods at the end of the year. In 2011, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 10% of the goods at year-end. For 2011, cost of goods sold was $5,400,000 for Gentry and $1,200,000 for Gaspard Farms. What was consolidated cost of goods sold for 2011? A. $6,600,000. B. $6,604,000. C. $5,620,000. D. $5,596,000. E. $5,625,000. 7. X-Beams Inc. owned 70% of the voting common stock of Kent Corp. During 2011, Kent made several sales of inventory to X-Beams. The total selling price was $180,000 and the cost was $100,000. At the end of the year, 20% of the goods were still in X-Beams' inventory. Kent's reported net income was $300,000. What was the noncontrolling interest in Kent's net income? A. $90,000. B. $85,200. C. $54,000. D. $94,800. E. $86,640. 8. Justings Co. owned 80% of Evana Corp. During 2011, Justings sold to Evana land with a book value of $48,000. The selling price was $70,000. In its accounting records, Justings should A. not recognize a gain on the sale of the land since it was made to a related party. B. recognize a gain of $17,600. C. defer recognition of the gain until Evana sells the land to a third party. D. recognize a gain of $8,000. E. recognize a gain of $22,000. 5-3 000. 11.000. Clemente sold equipment to Snider for $125.800. $110.000. $26. E.000.000. 5-4 .Chapter 05 . The equipment had cost Clemente $140. $105. $95.000. B. The land had a book value of $32. D. $39.000. $100.000. owned all of the voting common stock of Snider Co.100.000.700. the balance in accumulated depreciation was $40. B. On January 2. 10.000. D.000.000. 2010. $100.000. Clemente Co. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31. D. $22. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31. Thelma sold a parcel of land to Norek. $105. $31.Intra-Entity Asset Transactions 9. $35.000 and was sold to Norek for $45. On January 2. owned 70% of the voting common stock of Thelma Co. Thelma's reported net income for 2010 was $119. C. C. What is the noncontrolling interest's share of Thelma's net income? A.600. 2011? A. 2010. At the time of the sale. $80. 2010? A.000. $90. $85. The equipment had a remaining useful life of five years and a $0 salvage value. Norek Corp. $60. C. E.200.Consolidated Financial Statements . Straight-line depreciation is used by both Clemente and Snider. B. E.000. $21. $690.000.600. $672.000.000 at the end of the year. The corporations' balance sheets dated December 31. B. When the goods are sold to a third party by Lord. When Von sold the goods to Lord. What is the consolidated balance for land on the 2011 balance sheet? A. sold inventory to its wholly-owned subsidiary. $41. D. C. On the original date of acquisition. $737. C.600. and $25. 13. when is the $14.Chapter 05 . There were no other transactions which affected the companies' land accounts during 2010. The selling price was $83. What is the noncontrolling interest's share of Devin's net income for 2010? A. The inventory cost $30.000 gain realized? A.600. E. and for Shannon--$256. owned 70% of the voting common stock of Devin Co. Chain sold to Shannon a parcel of land with a book value of $65. During 2010.000 for 2010. E. Bauerly decided to use the equity method to account for the investment. 2010. owned all of the voting common stock of Shannon Corp. C. $33. 5-5 . 2011. During 2010. No gain can be recognized since the transaction was between related parties.600. $36. When Lord pays Von for the goods. 14. D. When the goods are used by Lord. On April 4. Chain Co. $654.000. $45.000.000. Devin reported net income of $137.Consolidated Financial Statements .000. Bauerly Co.Intra-Entity Asset Transactions 12. From the perspective of the combination. D. B.100.000.000. Devin made frequent sales of inventory to Bauerly.000. the book value of Shannon's land was equal to its fair value. E. $755. There were unrealized gains of $40. Lord Co. include the following balances for land: for Chain-$416.000 in the beginning inventory.000 and was sold to Lord for $44. B.000. Von Co. D. $90. 17. 16. $91.000. Yukon Co. 2011.000. sold equipment to its subsidiary. Payton Co. $32. Net income for Sparis was $912. Yukon made sales of inventory to Ontario.000. were $420. On their separate 2011 income statements. $15. The amount of depreciation expense on the consolidated income statement for 2011 would have been A.680. which include a markup over cost of 25%. B. What was the noncontrolling interest's share of Sparis' net income for 2011? A.375. $110. D. The equipment had cost $125. respectively. C. $148. $30.000. E. At the end of each year.000. The equipment had an estimated remaining useful life of eight years and $0 salvage value. Gibson Corp.800. The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2011 is A. Sparis frequently made sales of inventory to Gibson. $139.625. B. $109.000 and $60. acquired 75% percent of the voting common stock of Ontario Corp.000 in 2011. $85.600.Consolidated Financial Statements . C. and the balance in accumulated depreciation was $45. Gibson still owned 30% of the goods..Chapter 05 .000 and was sold to Ontario for $390.000. C. 2011.000.000 of the goods in its inventory at the end of the year.Intra-Entity Asset Transactions 15. Both companies use straight-line depreciation. on January 1.500.720.000. $91. During the year. B. 5-6 . owned a 90% interest in Sparis Co.000 during 2011. $134.680. E.000. Payton and Starker reported depreciation expense of $84. E.000. On January 1. $144.000. D. $20.000. Ontario still had $60. $90.000 in 2010 and $500. Starker Corp. The sales. The inventory cost Yukon $260. for $115. 20.000. C. The amount of unrealized intercompany profit in ending inventory at December 31.540. E.000.400. $1.540.000 and $952. During October 2011.000. $1. Prince Corp. B. C. $1.'s common stock.022.400. What are consolidated sales and cost of goods sold for 2011? A.400.092.000 and cost of goods sold of $252.092.400. $1. D.000.000. holds 90% of the common stock of Skillet Co. gross profit percentages were 30% of sales for Prince and 40% of sales for Kile. Pot reported sales of $1.000 and $952. Pot Co. $1.000. Included in the amounts for Skillet's sales were Skillet's sales of merchandise to Pot for $140.000.000. E. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011.540.Intra-Entity Asset Transactions 18. There were no sales from Skillet to Pot. $56.400. 2011. Intra-entity sales had the same markup as sales to outsiders. $1. $1.400.540. 5-7 . Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140. $42. 19. B.Chapter 05 . $1.000. What are consolidated sales and cost of goods sold for 2011? A.000.000 and $1.120. $1. owned 80% of Kile Corp. Intra-entity sales had the same markup as sales to outsiders.000. For 2011. Pot still had 40% of the intra-entity sales as inventory at the end of 2011.000 and cost of goods sold of $840.000. $22. B.078. There were no sales from Pot to Skillet.000.000.000 and $966. 2011 that should be eliminated in the consolidation process is A.000 and $1.400. During 2011. Skillet had sales of $420.000. $1. C.Consolidated Financial Statements .400. Kile sold merchandise to Prince for $140.000 and $1.000.000 and $974. D. 50% of this merchandise remained in Prince's inventory. For this same period. $28.000. $21.000 and $1. E.000 and $1.000 and $966.000. At December 31. D.078. $1.800.000.000. owned 70% of the outstanding common stock of Shrugs Inc. C.000. No salvage value was anticipated and the building was to be depreciated on the straight-line basis.000 and $1. Intra-entity sales had the same markup as sales to outsiders. Dalton sold this building to Shrugs for $392. There were no sales from Skillet to Pot. C.000.300. At that time. Consolidated net income must be reduced by $44. Dalton Corp.000.540. On January 1.Intra-Entity Asset Transactions 21.000 and $1.Chapter 05 .000 and $1.Consolidated Financial Statements .000 and $1. On January 1.000.400.078.092. B. $1.000.540.000. Dalton acquired a building with a ten-year life for $420. What are consolidated sales and cost of goods sold for 2011? A. The reported sales did not include any intra-entity sales. E. D.000 and $966. Consolidated net income must be reduced by $56. how does this transfer affect the calculation of Dalton's share of consolidated net income? A. Consolidated net income must be reduced by $34.400. there were intra-entity sales from Pot to Skillet in the amount of $140. $1. 5-8 .000. In preparing financial statements for 2011.071.022. $1. In addition to the reported amounts. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011. the building had a remaining life of eight years but still no expected salvage value.400. E. Consolidated net income must be reduced by $50.400. 2009. $1. Consolidated net income must be reduced by $49. D. 22. 2011.000. B. Only half of this purchase had been paid for by Strong by the end of the year. before preparing the consolidated worksheet. B. 23. There is no active market for Strong's stock. What is the total of consolidated revenues? A. Of this payment. the financial statements appeared as follows: During 2011.000. $560.000. 5-9 . D. Inc.Consolidated Financial Statements . C.000. 60% of these goods were still in the company's possession on December 31. for $364.Intra-Entity Asset Transactions On January 1. E.000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35. Pride bought inventory for $112. 2011. $644. acquired 80% of the outstanding voting common stock of Strong Corp.000. $840.000. $700. $28. Pride.000. Any remaining excess was attributable to goodwill which has not been impaired. $588. As of December 31. 2011.Chapter 05 .000 and sold it to Strong for $140.000.000. $184. What is the consolidated total of noncontrolling interest appearing in the balance sheet? A. C. C.000. 25. 5-10 .600. $1. $117. $120.800.200. C. $1.000. D.000. 27.000.000. $349.Intra-Entity Asset Transactions 24. B.440.000. $336.069.064.300. B. D.200. What is the total of consolidated cost of goods sold? A. $97.400. $280. $42. $203. $53.040. $49. $100.400. D. 26.800. $1.000. D. E.000.Chapter 05 . $364. E. 2011? A. $196. $212. E. $47.800. What is the consolidated total for inventory at December 31.800. B. C.000.066. 28. B.000. B. $347. $168. 2011? A.000.058.600. $1. E. $35. What is the consolidated total for equipment (net) at December 31. C.800.Consolidated Financial Statements . $952. $93. E. D. What is the total of consolidated operating expenses? A. C. which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory? A. Investment in Strickland Company. E. 29.Chapter 05 . D. which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory? A. Inventory.Consolidated Financial Statements .Intra-Entity Asset Transactions Strickland Company sells inventory to its parent. 31. B. Sales. In the consolidation worksheet for 2010. One-third of the inventory is sold by Carter in 2010. Inventory. Cost of goods sold. Inventory. In the consolidation worksheet for 2010. 5-11 . Sales. E. Investment in Strickland Company. C. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Investment in Strickland Company. B. Sales. Cost of goods sold. Retained earnings. E. B. Carter Company. at a profit during 2010. In the consolidation worksheet for 2010. 30. D. C. Cost of goods sold. Retained earnings. D. Retained earnings. D. Inventory. In the consolidation worksheet for 2010. E.Chapter 05 . Cost of goods sold. B. Cost of goods sold. Sales. Cost of goods sold. 33. C. Retained earnings. Investment in Strickland Company. at a profit during 2010. D. Retained earnings. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. In the consolidation worksheet for 2011. D. C. E. 34. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. E. Sales. B. Investment in Strickland Company. Inventory. Investment in Strickland Company. In the consolidation worksheet for 2011. 5-12 . Walsh Company sells inventory to its subsidiary. C. Fisher Company. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. assuming Carter uses the initial value method of accounting for its investment in Strickland. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. B. Inventory.Consolidated Financial Statements .Intra-Entity Asset Transactions 32. Retained earnings. assuming Carter uses the initial value methd of accounting for its investment in Strickland. Sales. Chapter 05 . 5-13 . B. Investment in Fisher Company. Inventory. D. Retained earnings. 36. B. In the consolidation worksheet for 2010. E. Cost of goods sold. 37. C. In the consolidation worksheet for 2010. C. Sales. Retained earnings. In the consolidation worksheet for 2010. E. E. Inventory. which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory? A. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Cost of goods sold. which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory? A. Inventory. Investment in Fisher Company. Sales. 38. B. Inventory. Cost of goods sold. In the consolidation worksheet for 2010. E. B. Retained earnings.Intra-Entity Asset Transactions 35. D. Cost of goods sold. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. C. Investment in Fisher Company. Sales. Retained earnings. C. Sales. D. Investment in Fisher Company.Consolidated Financial Statements . D. E. Cost of goods sold. E. B. Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers. C. C. D. Retained earnings.Chapter 05 . Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit. E. 41.Intra-Entity Asset Transactions 39. D. D.Consolidated Financial Statements . before the effect of the noncontrolling interest. B. In the consolidation worksheet for 2011. and using the initial value method. C. Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers. Cost of goods sold. Retained earnings. Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit. 40. Investment in Fisher Company. B. In the consolidation worksheet for 2011. Income from subsidiary will be the same for upstream and downstream profit. Inventory. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Sales. Investment in Fisher Company. 5-14 . Sales. which of the following statements is true when there is a noncontrolling interest? A. Inventory. When comparing the difference between an upstream and downstream transfer of inventory. before the effect of the noncontrolling interest. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. 5-15 . before the noncontrolling interest. using the initial value method? A. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. and using the initial value method.Chapter 05 . Income from subsidiary will be lower by the amount of the beginning inventory profits multiplied by the noncontrolling interest percentage for upstream transfers. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. before the noncontrolling interest. When comparing the difference between an upstream and downstream transfer of inventory. C. 43. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. Which of the following statements is true regarding inventory transfers between a parent and its subsidiary. E. E. B. D. Income from subsidiary will be higher by the amount of the beginning inventory profits multiplied by the noncontrolling interest percentage for upstream transfers. Income from subsidiary will be reduced for upstream ending inventory profits but not for downstream profits. The sale of merchandise between a parent and its subsidiary represents an arm's-length transaction and thus provides the basis for the recognition of profit on such transfers. C. Merchandise transfers from a parent to its subsidiary that have not been sold to unaffiliated parties should be included in consolidated inventory at their transfer price.Consolidated Financial Statements . Income from subsidiary will be reduced for downstream ending inventory profits but not for upstream profits. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. Income from subsidiary will be the same for upstream and downstream profits. Noncontrolling interest in subsidiary's net income should not be reduced for upstream or downstream ending inventory profits. This procedure is appropriate even if all the intra-entity transactions unsold at year-end may not be sold in the next year. which of the following statements is true when there is a noncontrolling interest? A. B. This procedure is inappropriate because all the intra-entity transactions unsold at year-end may not be sold in the next year. D.Intra-Entity Asset Transactions 42. A worksheet entry is made with a credit to retained earnings for an upstream transfer. A worksheet entry is made with a debit to retained earnings for a downstream transfer. Which of the following statements is true regarding an intra-entity sale of land? A. A loss and a gain are always eliminated in a consolidated income statement. An intra-entity sale took place whereby the transfer price exceeded the book value of a depreciable asset. A gain will be reported in the consolidated income statement in 2011. A worksheet entry is made with a debit to retained earnings for a downstream transfer. Parent sold land to its subsidiary for a gain in 2008. D. Which statement is true for the year following the sale? A. 46. Which statement is true for the year following the sale? A. D. E. 47. A gain will be reported in the consolidated income statement in 2008. D. B. 45.Chapter 05 . C. No gain will be reported in the 2011 consolidated income statement.Intra-Entity Asset Transactions 44. E. A loss is always recognized but a gain is eliminated in a consolidated income statement. The subsidiary will report a gain in 2008. 5-16 . C. B. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method. E. An intra-entity sale took place whereby the book value exceeded the transfer price of a depreciable asset.Consolidated Financial Statements . E. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer. A worksheet entry is made with a debit to gain for an upstream transfer. A worksheet entry is made with a debit to retained earnings for an upstream transfer. A worksheet entry is made with a debit to gain for a downstream transfer. B. C. Which of the following statements is true? A. C. regardless of the method used account for the investment. No worksheet entry is necessary. B. A loss and a gain are always recognized in a consolidated income statement. D. No worksheet entry is necessary. A gain is always recognized but a loss is eliminated in a consolidated income statement. Only the parent company will report a gain in 2011. The subsidiary sold the land externally for a gain in 2011. A gain or loss is eliminated by adjusting stockholders' equity through comprehensive income. Which statement is true for the year following the sale? A. regardless of the method used to account for the investment. A worksheet entry is made with a debit to retained earnings for an upstream transfer. D.Intra-Entity Asset Transactions 48. 2010. Gargiulo was acquired on January 1. B. C. B. A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.Chapter 05 .Consolidated Financial Statements . The following data are available pertaining to Gargiulo's income and dividends. 49. Assume the equity method is used. Noncontrolling interest in subsidiary's net income is affected only when the transfer is upstream. a 90% owned subsidiary of Posito Corporation. Noncontrolling interest in subsidiary's net income is never affected by a gain on the transfer. C. E. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer. Which of the following statements is true concerning an intra-entity transfer of a depreciable asset? A. E. An intra-entity sale took place whereby the transfer price was less than the book value of a depreciable asset. Noncontrolling interest in subsidiary's net income is increased by an upstream gain in the year of transfer. sells inventory to Posito at a 25% profit on selling price. Gargiulo Company. D. Noncontrolling interest in subsidiary's net income is affected by a downstream gain only. The following data are available pertaining to intra-entity purchases. 5-17 . Noncontrolling interest in subsidiary's net income is always affected by a gain on the transfer. No worksheet entry is necessary. A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method. $75. C. A. D. $6.970. $8. B.500. C. E.375. B. $8. $62.030.270.000. C. Compute the equity in earnings of Gargiulo reported on Posito's books for 2010. $6. $62. $7. $63.Chapter 05 . E. 51.700. D. $8. B.430. $77. D.000. C. $84.270.850.600. 53.570.580. B. A.600. $70. Compute the equity in earnings of Gargiulo reported on Posito's books for 2012. Compute the equity in earnings of Gargiulo reported on Posito's books for 2011. D. $75.800. Compute the noncontrolling interest in Gargiulo's net income for 2011. 52. A. $84. A. $8. $84.Intra-Entity Asset Transactions 50. D.130.730. $83. B. Compute the noncontrolling interest in Gargiulo's net income for 2010. $76.230. $84.925. $7. 54.000. C. $75. $6. $7. $63.825. E. A.870. E.500.Consolidated Financial Statements . 5-18 .400. E. B. what amount would be debited to cost of goods sold for the 2011 consolidation worksheet with regard to the unrealized gross profit of the 2011 intraentity transfer of merchandise? A. $1. D. E. $3. $600.375. $2.600. D.485. $800. $750. $1. $9. $675.000. B.000.Intra-Entity Asset Transactions 55. E.425. $900. B.000. C. $2.Chapter 05 . 57. what amount would be debited to cost of goods sold for the 2010 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise? A. $9.400.Consolidated Financial Statements . For consolidation purposes.000. $9. $270. $3. B. 58. C. what amount would be debited to cost of goods sold for the 2012 consolidation worksheet with regard to the unrealized gross profit of the 2012 intraentity transfer of merchandise? A. E.400. E. For consolidation purposes.760. D. $300. For consolidation purposes. C. $240. D. 5-19 . $3. 56. $9. A.325. C. $8. Compute the noncontrolling interest in Gargiulo's net income for 2012. $1. In the current year. 61.400. $2. Shannon still possesses 30 percent of this inventory.Intra-Entity Asset Transactions 59. For the same period. $800.000. $900. what amount would be debited to January 1 retained earnings for the 2012 consolidation worksheet entry with regard to the unrealized gross profit of the 2011 intra-entity transfer of merchandise? A. D. B. Patti Company owns 80% of the common stock of Shannon. For consolidation purposes. C.000. D. what amount would be debited to January 1 retained earnings for the 2011 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise? A. At the end of the year.500.600. $270.600. $300.000. $240.000. $3. E.000 and cost of goods sold of $7. $240. Patti sold merchandise to Shannon for $60.000. D. $270.000 at a price based on the normal markup. $2. For consolidation purposes. 60.Chapter 05 . E. 5-20 .000 and cost of goods sold of $160. E. B. Shannon has sales of $200. C. During the year. $1. $300. what amount would be debited to January 1 retained earnings for the 2010 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise? A. Patti reports sales of $10. For consolidation purposes. $0. B. Inc.Consolidated Financial Statements . C. $1.000. Intra-Entity Asset Transactions 62.000.500. B.000. On January 1. at ten remaining years.140.200. $7. except Shannon sold inventory to Patti. Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80. 63.000.000. $10. bought the equipment from Wilson for $68. The equipment had a book value of $50.000. $10.500.000. D.600.200. $10. $7. $7. $7.000. C. D. Compute consolidated sales. $10. E. $10.660. A. B.604. E.000. 2010. $10. The following data are available pertaining to Simon's income and dividends: 5-21 . 64.Consolidated Financial Statements . E.126. $7.000. C.615. Wilson realized that the useful life of the equipment was longer than originally anticipated. Assume the same information.000.Chapter 05 . $10.000.000.000 at January 1. $10.000. A. 2010. $10.250 and for depreciation purposes used the estimated remaining life as of that date. C. a 90% owned subsidiary of Wilson Company.260. 2010 Simon Company. On April 1. B. Compute consolidated cost of goods sold.126.000.000.000.260. Compute consolidated sales.000.140. $10. A. D. 000.825. C.500. D. 67. $19. Compute the amortization of gain through a depreciation adjustment for 2011 for consolidation purposes.000. D. $7.000. A. $1. A. B. $2.825. $37. A. E. $1.500. $7. 5-22 . C. $18. Compute the gain on transfer of equipment reported by Wilson for 2010.Chapter 05 . C. Compute the amortization of gain through a depreciation adjustment for 2012 for consolidation purposes. C. D.950. E. B. $1.250. $1. B.500.000. E. $38.500. A. $5. E. $2. $1.250.000.750. D. 68.Consolidated Financial Statements . Compute the amortization of gain through a depreciation adjustment for 2010 for consolidation purposes.925.250. $11. $2.950. B.825. 66. $1.500.Intra-Entity Asset Transactions 65. $1. $1. $1. $109. C. D. D. $73. $117. Inc. $119. Compute Wilson's share of income from Simon for consolidation for 2012.000 less accumulated depreciation of $48.000.000. $118. Smeder's records carried the equipment at a cost of $120. $108.800.000. E.000.825. Smeder reported net income of $28. Smeder Company. B. 71. A.575.825. E. Straight-line depreciation is used.000 and $32. C. A. D.800. At the date of transfer. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84.000. $72. $115. On January 1. $109. C.000. B.800. $110. 70. an 80% owned subsidiary of Collins. A.000. $73.500. $90.Chapter 05 . $72. 2010. respectively. $118.000. Compute Wilson's share of income from Simon for consolidation for 2010.000 cash.Intra-Entity Asset Transactions 69. Compute Wilson's share of income from Simon for consolidation for 2011.000. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.000 for 2010 and 2011.Consolidated Financial Statements .. B. $106. E. 5-23 . D. Credit accumulated depreciation. C. $24. 74. $34. C.000. B. E. D.000. 5-24 . A. $36. D. $14. 75. C. E. Credit accumulated depreciation.000.Chapter 05 . Debit accumulated depreciation. A. $12.200. $27. $46.000. what net debit or credit will be made for the year 2010 relating to the accumulated depreciation for the equipment transfer? A. $46. B. Compute the gain recognized by Smeder Company relating to the equipment for 2010.Consolidated Financial Statements .000. A.600.000.000.400. $27. $23. Compute Collins' share of Smeder's net income for 2010.400. D. E. Compute Collins' share of Smeder's net income for 2011.Intra-Entity Asset Transactions 72. 73.000. Debit accumulated depreciation.000.000. $10. C. $48.600. $11. $12. $0. For consolidation purposes.000. $2.800. $34. $48.000.200. Debit accumulated depreciation. $18. E. B. $12. B. 000 for 2010 and 2011. $50.000. The land originally cost Leo $60. 77. Credit land for $15. $15. for $75. E. On a consolidation worksheet.000. Increase $10. Decrease $14. $65. C. Credit retained earnings for $50. Stiller reported net income of $125. E.000.000. what adjustment would be made for 2011 regarding the land transfer? A.000 loss.Chapter 05 . having used the equity method. Leo uses the equity method to account for its investment. 5-25 . D. Decrease $12. Decrease $10.000. E.000 gain. Debit retained earnings for $15.000.000.000 loss. B.000 and $140. D. respectively.000 gain. D. Debit investment in Stiller for $15. 78. C. B. Credit gain for $15.000. Debit gain for $50.000.Intra-Entity Asset Transactions 76.000.000. Increase $2. C.000. Credit retained earnings for $15.000 gain. B. $15.Consolidated Financial Statements . 79.000.000. E. B.000. On a consolidation worksheet. Stiller Company. purchased land from Leo on March 1. 2010. Debit land for $15.000. Compute the gain or loss on the intra-entity sale of land. an 80% owned subsidiary of Leo Company. What is the net effect on consolidated net income in 2010 due to the equipment transfer? A. C. D. A.000. Debit retained earnings for $50. Credit gain for $50. $50. what adjustment would be made for 2010 regarding the land transfer? A. $125. Which of the following will be included in a consolidation entry for 2010? A. for $80.000 in 2012.000 gain.000. C. 82. E.Chapter 05 .000. $80. $110. Credit gain for $5.000.000. A.000.000 loss.000. E.000.Intra-Entity Asset Transactions 80.000. sold land to Parker on May 1. E.000. respectively.000. D.000. Inc. A. $85.. Compute the gain or loss on the intra-entity sale of land. $112. $97. 2011. $125. $140. B. $88. A.000. D.Consolidated Financial Statements . B. The land originally cost Stark $85. a 90% owned subsidiary of Parker.000. C. Stark Company. D. Credit loss for $5. Stark reported net income of $200. 5-26 . Credit land for $5. B.000.000 for 2010. Compute income from Stiller on Leo's books for 2011.000. and 2012. Compute income from Stiller on Leo's books for 2010. B.000.000. Parker sold the land it purchased from Stark in 2010 for $92. 81. and $220.000 gain. Debit loss for $5. $100. C.000. D.000. Debit gain for $5. 83. 2010. $5.000 loss. C. $80. $180. $100. $85. $5. E.000 loss. Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 84. Which of the following will be included in a consolidation entry for 2011? A. Debit retained earnings for $5,000. B. Credit retained earnings for $5,000. C. Debit investment in subsidiary for $5,000. D. Credit investment in subsidiary for $5,000. E. Credit land for $5,000. 85. Compute income from Stark reported on Parker's books for 2010. A. $205,000. B. $200,000. C. $180,000. D. $175,500. E. $184,500. 86. Compute income from Stark reported on Parker's books for 2011. A. $185,000. B. $157,500. C. $166,500. D. $162,000. E. $180,000. 87. Compute Parker's reported gain or loss relating to the land for 2012. A. $12,000 gain. B. $5,000 loss. C. $12,000 loss. D. $7,000 gain. E. $7,000 loss. 88. Compute Stark's reported gain or loss relating to the land for 2012. A. $5,000 loss. B. $5,000 gain. C. $7,000 loss. D. $7,000 gain. E. $0. 5-27 Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 89. Compute the gain or loss relating to the land that will be reported in consolidated net income for 2012. A. $5,000 loss. B. $7,000 gain. C. $12,000 gain. D. $7,000 loss. E. $12,000 loss. 90. Compute income from Stark reported on Parker's books for 2012. A. $204,300. B. $202,500. C. $193,500. D. $191,700. E. $198,000. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. 91. What is the gain or loss on equipment reported by Devin for 2010? A. $54,000 gain. B. $21,000 loss. C. $21,000 gain. D. $9,000 loss. E. $9,000 gain. 92. What is the consolidated gain or loss on equipment for 2010? A. $0. B. $9,000 gain. C. $9,000 loss. D. $21,000 gain. E. $21,000 loss. 5-28 Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 93. Compute the income from Devin reported on Pepe's books for 2010. A. $174,600. B. $184,800. C. $172,000. D. $171,000. E. $180,000. 94. Compute the income from Devin reported on Pepe's books for 2011. A. $190,200. B. $196,000. C. $194,400. D. $187,000. E. $195,000. 95. Compute the noncontrolling interest in the net income of Devin for 2010. A. $116,400. B. $120,400. C. $120,000. D. $123,200. E. $112,000. 96. Compute the noncontrolling interest in the net income of Devin for 2011. A. $126,800. B. $132,000. C. $122,000. D. $130,000. E. $129,600. 5-29 recorded under the equity method. select the correct entry (A . Pate Corp. On April 7. its subsidiary. Downstream ending inventory profit. using the initial value method. recorded under the equity method. Debit retained earnings 3. when will the gain on this transfer actually be earned? 5-30 .. Eliminate income from subsidiary. using the initial value method. None of the above 10. using the initial value method.Chapter 05 . None of the above 2. sold land to Shannahan Co. Debit investment in subsidiary Upstream beginning inventory profit. Credit retained earnings 8. in the period after transfer.Consolidated Financial Statements . Credit retained earnings 5. 2011. using the initial value method. using the initial value method.10). Eliminate recorded amortization of acquisition fair value over book value. Upstream transfer of depreciable assets. From a consolidated point of view. For each of the following situations (1 . where subsidiary recognizes a gain. in the period after transfer. Debit retained earnings 6. in the period after transfer. where subsidiary recognizes a loss.Intra-Entity Asset Transactions Matching Questions 97. Downstream transfer of land. where parent recognizes a gain. Downstream beginning inventory profit. where parent recognizes a loss. Credit investment in subsidiary 9.E) that would be required on a consolidation worksheet. 1. Downstream transfer of depreciable assets. Debit retained earnings 7. using the initial value method. in the period after transfer. ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ Essay Questions 98. Debit retained earnings 4. Upstream transfer of land. Upstream ending inventory profit. using the initial value method. using the initial value method. acquired all of the voting common stock of Caleb Co. Forsyth still owned all of the inventory at the end of 2011. During 2011. Edwards Co.. sold inventory to Leeward Co. when will the gain on this transfer be earned? 100. Varton Corp.Consolidated Financial Statements . 2011.Intra-Entity Asset Transactions 99. How does a gain on an intra-entity sale of equipment affect the calculation of a noncontrolling interest? 5-31 . Forsyth Corp. From a consolidated point of view. sold inventory to its parent company. Throughout 2011. Cleveland Co. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2011? 102.Chapter 05 . its subsidiary. Varton owned some land with a book value of $84.000.000 that was sold to Caleb for its fair value of $120. How should this transaction be accounted for by the consolidated entity? 101. on January 1. Chapter 05 . How is the gain on an intra-entity transfer of a depreciable asset realized? 105. During 2011. How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation? 104. Bumstead sold land to Dithers at a gain. acquired all of the common stock of Bumstead Corp. No consolidation entry for the sale of the land was made at the end of 2011. 2011.Consolidated Financial Statements . on January 1. What errors will this omission cause in the consolidated financial statements? 106.Intra-Entity Asset Transactions 103. Dithers Inc. Why do intra-entity transfers between the component companies of a business combination occur so frequently? 5-32 . Inc. What is the impact on the noncontrolling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies? 110.Chapter 05 . Inc. what amount of these sales is eliminated? 108. What is meant by unrealized inventory gains. The transfer price was equal to 30 percent of the sales price.Intra-Entity Asset Transactions 107.Consolidated Financial Statements . and how are they treated on a consolidation worksheet? 109. and bought $200. Fraker. owns 90 percent of Richards.000 of Richards' inventory in 2011. When preparing consolidated financial statements. When is the gain on an intra-entity transfer of land realized? 5-33 . The inventory originally cost King $420. In the current year. Stodd has sales of $500.000. For the same period. What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset? 112. owns 85% of James Co.Intra-Entity Asset Transactions 111.000 and cost of goods sold of $400. At the end of the year. King sells inventory to James for $500.Consolidated Financial Statements . At 12/31/11. Tara Company owns 80 percent of the common stock of Stodd Inc.000 and cost of goods sold of $3. During 2011. During the year. King Corp. 113. 25% of the goods were still in James' inventory.Chapter 05 . Required: Prepare the Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet.000.000 at a price based on the normal markup.000. 5-34 . King uses the equity method to account for this investment.000. Prepare the consolidation entry to defer the unrealized gain.500.000. Stodd sold merchandise to Tara for $40. Tara reports sales of $5. Tara still possesses 20 percent of this inventory. Required: Prepare Consolidation Entry TI for the intra-entity transfer and Consolidation Entry G for the ending inventory adjustment necessary for the consolidation worksheet at 12/31/11. on January 1.000.000 and the selling price was $140. Quint still had one-eighth of the goods on hand at the end of the year. During 2010. Flintstone decided to use the initial value method to account for this investment. is a wholly owned subsidiary of Quint Inc. Required: Prepare Consolidation Entry *G. During 2011. which would have to be recorded at the end of 2011. 116. Strayten Corp. sold goods to Nelson near the end of 2011. Nelson had not sold any of the goods by the end of the year. 5-35 .Chapter 05 .000 inventory with a cost of $500.000..Consolidated Financial Statements . Flintstone sold to Rubble for $600. Required: Prepare Consolidation Entry TI and Consolidation Entry G that are required for 2011. Quint decided to use the initial value method to account for this investment. Yoderly Co. The goods had cost Yoderly $105. The selling price was $64. At the end of the year 30% of the goods were still in Rubble's inventory. 115. 2011.000. Flintstone Inc. Strayten sold Quint goods which had cost $48.Intra-Entity Asset Transactions 114. acquired all of Rubble Co. a wholly owned subsidiary of Nelson Corp.000.. and Lawler Co. Stroban sold a parcel of land to Hambly. Ritter sold inventory to Lawler. During 2010. Lawler still held 30% of the inventory. The gross profit rate was 30% of the selling price. owned all of the voting common stock of Stateside Co.000 and was sold to Hambly for $145.000. At the end of 2011. and they were sold to Lawler for $100. The land had a book value of $82. 5-36 .000. The goods had cost Ritter $65. Hambly Corp.'s net income? 118.000. McGraw Corp.Chapter 05 . Required: How should the sale between Lawler and Ritter be accounted for in a consolidation worksheet? Show worksheet entries to support your answer. and Virginia decided to use the partial equity method to account for this investment. Virginia made cash sales of $400.000. By the end of 2010. During 2011. Both companies use the perpetual inventory method. During 2011. Stroban's reported net income for 2011 was $119.000 to Stateside. Virginia Corp.000 cash. Stateside had sold 75% of the goods to outside parties for $420.Intra-Entity Asset Transactions 117. Required: What was the noncontrolling interest's share of Stroban Co. owned 80% of the voting common stock of Stroban Co. owned all of the voting common stock of both Ritter Co.Consolidated Financial Statements . 5-37 . 120.Intra-Entity Asset Transactions 119.Chapter 05 . 121. Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2010. Prepare the consolidation entries that should be made at the end of 2010.Consolidated Financial Statements . Prepare any 2011 consolidation worksheet entries that would be required regarding the 2010 inventory transfer. The following selected account balances were from the individual financial records of these two companies as of December 31. Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction. 2011: 122. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. and (3) Noncontrolling Interest in Subsidiary's Net Income. determine the balances that would appear for the following accounts: (1) Cost of Goods Sold.000 in 2011. Of this inventory. Required: For the consolidated financial statements for 2011. (2) Inventory.Chapter 05 .000 of the 2010 transfers were retained and then sold by Icecap in 2011 while $55. $39. Intra-entity transfers were $130.000 in 2010 and $165.000 of the 2011 transfers were held until 2012. 5-38 .Intra-Entity Asset Transactions Several years ago Polar Inc.Consolidated Financial Statements . Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost. 124. Polar sold a building to Icecap on January 1. and (3) Noncontrolling Interest in Subsidiary's Net Income.000 in net income in 2011 (not including any investment income) while Matin reported $126. The equipment originally cost $140.000 in 2010 and $112. sold equipment to Matin Inc.000 of the 2011 transfers were held until 2012. (a wholly-owned subsidiary) for $168.000 in 2011. Depreciation expense was calculated using the straight-line method.000.000 on that date. $29. 2011. Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost. Required: For the consolidated financial statements for 2011.Chapter 05 . Of this inventory. Musial Corp. determine the balances that would appear for the following accounts: (1) Cost of Goods Sold. 2010 for $112. although the book value of this asset was only $70. (2) Operating expenses.000 but had a book value of only $98. (2) Inventory. Intra-entity transfers were $70. determine the balances that would appear for the following accounts: (1) Buildings (net). Assume there is no amortization related to the original investment. the equipment had a five-year remaining life. 5-39 . On January 1. Musial earned $308.000 of the 2010 transfers were retained and then sold by Polar in 2011 whereas $49.Intra-Entity Asset Transactions 123. and (3) Noncontrolling Interest in Subsidiary's Net Income.000 when transferred.Consolidated Financial Statements . The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value.000 in cash.000. On that date. Required: For the consolidated financial statements for 2011. What is consolidated net income for 2011? 126. 5-40 . what is consolidated net income for 2009? 127. assuming that Musial owned only 90% of Matin and the equipment transfer had been upstream.Intra-Entity Asset Transactions 125.Consolidated Financial Statements . Assuming that Musial owned only 90% of Matin. Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2011.Chapter 05 . 000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. E. From the perspective of the combination. respectively. when is the gain on the sale of the land realized? A. Consolidated cost of goods sold for 2011 was $2.Chapter 05 . 2011. On November 8. B. When Wood Co.000 and $200. on January 1. C. 5-41 . acquired 60% of Stendall Co.Intra-Entity Asset Transactions Answer Key Multiple Choice Questions 1. Edgar made several sales of inventory to Stendall. As Wood uses the land. When Wood Co. its wholly owned subsidiary.500 and was sold to Wood for $89. sold land to Wood Co. Power Corp. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. No gain can be recognized. The cost and selling price of the goods were $140.000.. D.Intra-Entity Asset Transactions Chapter 05 Consolidated Financial Statements .000. Edgar Co. Proportionately over a designated period of years. The land cost $61. Stendall still owned one-fourth of the goods at the end of 2011.Consolidated Financial Statements . begins using the land productively. During 2011.140. 2011. sells the land to a third party. 000 because of the noncontrolling interest in the subsidiary. How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost. Consolidated cost of goods sold would have been less than $2. E. B.Chapter 05 . The effect on consolidated cost of goods sold cannot be predicted from the information provided. 5-42 .000 because of the noncontrolling interest in the subsidiary.140. Consolidated cost of goods sold would have been more than $2.Consolidated Financial Statements . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. but from Stendall to Edgar? A.Intra-Entity Asset Transactions 2. C. Consolidated cost of goods sold would have been more than $2.000. D.140.000 because of the controlling interest in the subsidiary.140. Consolidated cost of goods sold would have remained $2.140. How would noncontrolling interest in net income have differed if the transfers had been for the same amount and cost.000. 5-43 . Race Corp. Noncontrolling interest in net income would have increased by $24. 2011.900.800.000 goods which cost $330. B.800.000. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. $30.Chapter 05 . E. During the year.Intra-Entity Asset Transactions 3.000. $40. acquired 80% of the voting common stock of Gallow Inc. D. Noncontrolling interest in net income would have decreased by $18.600.900. C. $32. D. B.000.Consolidated Financial Statements .000. Gallow's reported net income was $204. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. $22. E. Noncontrolling interest in net income would have decreased by $6. What was the noncontrolling interest's share of consolidated net income? A. Race decided to use the equity method to account for this investment. Race sold to Gallow for $450. C. Noncontrolling interest in net income would have increased by $20. 4. Noncontrolling interest in net income would have decreased by $56. On January 1.000. Gallow still owned 15% of the goods at year-end.000.000. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. and Race's net income was $806. but from Stendall to Edgar? A. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. $3. $16. $5. D.800. During 2011. Cost of goods sold was $10. 5-44 .000. $6.800. $5. $6. Webb Co. C. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. 20011. and Gaspard Farms still owned 10% of the goods at year-end. For 2011.000.000. $15. cost of goods sold was $5.620. E.000.000. What was consolidated cost of goods sold for 2011? A.000 for Webb and $6.000. acquired 100% of Rand Inc.000.Intra-Entity Asset Transactions 5. Gentry Inc. Gaspard Farms still owned 12% of the goods at the end of the year.000 that cost Webb $1. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. $14.200. B. What was consolidated cost of goods sold? A. In 2011.800. 6.000.000 for Gentry and $1.000 for Gaspard Farms.000.000.400. Rand still owned 40% of the goods at the end of the year. E. Gentry sold Gaspard Farms for $625. $14.000. Webb sold goods to Rand for $2.000. acquired 100% of Gaspard Farms on January 5. $17.960. Gentry sold goods with a cost of $800.625.040.000 goods which had cost $425.Chapter 05 . 2010. B.000.400.000. on January 5.000 for Rand.604.200.400.600.560. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. During 2010.000 to Gaspard Farms for $1. Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption.596.Consolidated Financial Statements . C. $5. C. At the end of the year. not recognize a gain on the sale of the land since it was made to a related party. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. During 2011.000. X-Beams Inc. B.200.640.000. 8. Justings sold to Evana land with a book value of $48.Consolidated Financial Statements . In its accounting records. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. What was the noncontrolling interest in Kent's net income? A. B.000.000. The total selling price was $180. 20% of the goods were still in X-Beams' inventory. E. $90.000. Kent's reported net income was $300. $86. $54. $94. Justings Co. C. recognize a gain of $17. During 2011. Kent made several sales of inventory to X-Beams.800. owned 80% of Evana Corp. D.Chapter 05 . The selling price was $70.Intra-Entity Asset Transactions 7.000 and the cost was $100.000. E. Justings should A. $85. 5-45 .000. owned 70% of the voting common stock of Kent Corp. recognize a gain of $22.600. D.000. defer recognition of the gain until Evana sells the land to a third party. recognize a gain of $8. On January 2. owned all of the voting common stock of Snider Co. $35. the balance in accumulated depreciation was $40. E. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.000. 2010.000.000. $22. 2010. D.000. C. On January 2. Norek Corp. Clemente sold equipment to Snider for $125. The land had a book value of $32. owned 70% of the voting common stock of Thelma Co. D. Thelma's reported net income for 2010 was $119. 10. The equipment had cost Clemente $140. B.100.700.Consolidated Financial Statements . What is the noncontrolling interest's share of Thelma's net income? A.000.600. At the time of the sale. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31. C. Thelma sold a parcel of land to Norek.200.800. E. $85. $100. 5-46 .Chapter 05 .000. 2010? A. Clemente Co. $95. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. $31.Intra-Entity Asset Transactions 9. $105. B. Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. $80.000.000. The equipment had a remaining useful life of five years and a $0 salvage value. $26. Straight-line depreciation is used by both Clemente and Snider. $39.000 and was sold to Norek for $45.000.000. When the goods are used by Lord. Lord Co.000. When Von sold the goods to Lord. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31. The inventory cost $30. 12. $90. $60. When Lord pays Von for the goods. C. Von Co. 5-47 .000 gain realized? A. E.000 and was sold to Lord for $44. B.Intra-Entity Asset Transactions 11.Consolidated Financial Statements . No gain can be recognized since the transaction was between related parties. when is the $14. From the perspective of the combination.000. When the goods are sold to a third party by Lord.Chapter 05 . $105. C. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. During 2010. B. sold inventory to its wholly-owned subsidiary. $100. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. D.000. $110. 2011? A.000.000. E.000. D. 000.600. What is the noncontrolling interest's share of Devin's net income for 2010? A. There were unrealized gains of $40. the book value of Shannon's land was equal to its fair value. On the original date of acquisition. owned all of the voting common stock of Shannon Corp. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. $33. 14. On April 4. owned 70% of the voting common stock of Devin Co.Chapter 05 .600. $45.000. and $25.000. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances.000 in the beginning inventory. $41. B. The corporations' balance sheets dated December 31.600. D. $654. Bauerly decided to use the equity method to account for the investment.Consolidated Financial Statements . Devin made frequent sales of inventory to Bauerly. C.000 at the end of the year.000.000. $755. There were no other transactions which affected the companies' land accounts during 2010.000. $672. include the following balances for land: for Chain-$416. 2011. $21.Intra-Entity Asset Transactions 13.000. Chain sold to Shannon a parcel of land with a book value of $65.000. 5-48 .100. 2010.000 for 2010.600. E. The selling price was $83. C. $36. Devin reported net income of $137. B. $690. and for Shannon--$256. Chain Co. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption.000. Bauerly Co. During 2010. What is the consolidated balance for land on the 2011 balance sheet? A. $737. E. The sales.000. What was the noncontrolling interest's share of Sparis' net income for 2011? A. D. respectively.680. sold equipment to its subsidiary. At the end of each year. Starker Corp.000. owned a 90% interest in Sparis Co.680.000 in 2010 and $500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption.Intra-Entity Asset Transactions 15.600.800. C. Gibson Corp. $90. 2011. $134. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. $139. On their separate 2011 income statements. Payton Co.Chapter 05 . for $115.720.625. B. B. $109. On January 1. and the balance in accumulated depreciation was $45. Payton and Starker reported depreciation expense of $84. which include a markup over cost of 25%. $91.000.000 and $60. Gibson still owned 30% of the goods. Sparis frequently made sales of inventory to Gibson. The equipment had cost $125. were $420.000 in 2011.. $148. The equipment had an estimated remaining useful life of eight years and $0 salvage value.000.000. C. E.000. 16.375. Both companies use straight-line depreciation. $144. E. $90. Net income for Sparis was $912.000 during 2011. D. The amount of depreciation expense on the consolidated income statement for 2011 would have been A. $91. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. $85.000. 5-49 .Consolidated Financial Statements . Yukon Co.000. B.000. $15.000. holds 90% of the common stock of Skillet Co.000.000 and cost of goods sold of $252. $21. $32. The inventory cost Yukon $260.000. on January 1. During 2011. For 2011. For this same period.000. 50% of this merchandise remained in Prince's inventory. $20.Consolidated Financial Statements .000.000. At December 31. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. owned 80% of Kile Corp. Yukon made sales of inventory to Ontario. E. Kile sold merchandise to Prince for $140. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. D. $30.'s common stock. 5-50 . gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.120. The amount of unrealized intercompany profit in ending inventory at December 31. $28.400. 2011.500. Pot reported sales of $1.000. 2011 that should be eliminated in the consolidation process is A.Intra-Entity Asset Transactions 17. Skillet had sales of $420. E.000 of the goods in its inventory at the end of the year. B. Pot Co.000. $22. 18. $56.000. $110. During the year. Ontario still had $60. C. The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2011 is A. 2011. Prince Corp. During October 2011.000 and cost of goods sold of $840. C. $42.000.000 and was sold to Ontario for $390. acquired 75% percent of the voting common stock of Ontario Corp.Chapter 05 . D. $1. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances.000.Intra-Entity Asset Transactions 19. E.400.000 and $1. $1. What are consolidated sales and cost of goods sold for 2011? A. 20.000.000. What are consolidated sales and cost of goods sold for 2011? A. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.000 and $974. $1. 5-51 .Consolidated Financial Statements .000 and $1.400.400.000 and $966.000.022.000 and $1. $1.000.000. B. $1.092. $1.000 and $1. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011. Pot still had 40% of the intra-entity sales as inventory at the end of 2011. Included in the amounts for Skillet's sales were Skillet's sales of merchandise to Pot for $140. Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140.000 and $966. B. $1. D.000 and $952.078.540. $1.000 and $1. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. C.000.400.540.078.540.000. There were no sales from Pot to Skillet. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory.000. C. Intra-entity sales had the same markup as sales to outsiders. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory.400.000 and $952.540.400. There were no sales from Skillet to Pot. D.092. E.000. Intra-entity sales had the same markup as sales to outsiders. $1. $1.000.Chapter 05 .400. 000 and $966.000.071. Consolidated net income must be reduced by $44.000 and $1. C. Consolidated net income must be reduced by $50.400.000. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.000.022.000.000. 2009.400. Consolidated net income must be reduced by $34. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011. D. In addition to the reported amounts. In preparing financial statements for 2011. how does this transfer affect the calculation of Dalton's share of consolidated net income? A. What are consolidated sales and cost of goods sold for 2011? A. Intra-entity sales had the same markup as sales to outsiders.000.540.400. C. $1. $1. On January 1. there were intra-entity sales from Pot to Skillet in the amount of $140. 22. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. The reported sales did not include any intra-entity sales.000.300. $1.Consolidated Financial Statements . D.000 and $1.000 and $1. 5-52 .000 and $1. E.400. At that time.078. B. $1.800. owned 70% of the outstanding common stock of Shrugs Inc. No salvage value was anticipated and the building was to be depreciated on the straight-line basis. On January 1. Dalton sold this building to Shrugs for $392.Chapter 05 . Dalton Corp.000. the building had a remaining life of eight years but still no expected salvage value. Dalton acquired a building with a ten-year life for $420.Intra-Entity Asset Transactions 21.092. There were no sales from Skillet to Pot. Consolidated net income must be reduced by $56. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. B. E.000. 2011.000.540. Consolidated net income must be reduced by $49. $1. Only half of this purchase had been paid for by Strong by the end of the year. 60% of these goods were still in the company's possession on December 31. As of December 31.000 and sold it to Strong for $140. 2011. There is no active market for Strong's stock. before preparing the consolidated worksheet. Of this payment.Intra-Entity Asset Transactions On January 1. 5-53 . $28. for $364. Inc.000.000. acquired 80% of the outstanding voting common stock of Strong Corp. Any remaining excess was attributable to goodwill which has not been impaired.000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35.000.Consolidated Financial Statements . Pride. 2011. Pride bought inventory for $112.Chapter 05 . the financial statements appeared as follows: During 2011. 000. $560.000. B. $840. $42. D. 5-54 . $184.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements.000. D.Chapter 05 . C. B. C. $168.600. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory.000. E. B.200. $53. $644. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. $35. 25. $588. C. $49. $196. 24. $47.000. $700.000.000. D.000.800. $203.000.Intra-Entity Asset Transactions 23. What is the total of consolidated cost of goods sold? A. E. What is the total of consolidated operating expenses? A. What is the total of consolidated revenues? A. E. $212.800.000.Consolidated Financial Statements . $336. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. B. $1. $120.066.000.Chapter 05 .000. C. E.800. C.000.000. $347. $280. B.300.200.069. $1. 5-55 .040. D. $93. D.800. 28. What is the consolidated total of noncontrolling interest appearing in the balance sheet? A.Consolidated Financial Statements .600. $349. 27. $117. $364. 2011? A. What is the consolidated total for equipment (net) at December 31. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements.000. D. B. $100.064.400. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. $952. $97.440. $1. E.Intra-Entity Asset Transactions 26. E. C. What is the consolidated total for inventory at December 31.400.058.800. 2011? A. $1. One-third of the inventory is sold by Carter in 2010. C.Intra-Entity Asset Transactions Strickland Company sells inventory to its parent.Consolidated Financial Statements .Chapter 05 . C. Retained earnings. which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory? A. Sales. E. B. Investment in Strickland Company. In the consolidation worksheet for 2010. which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory? A. Retained earnings. In the consolidation worksheet for 2010. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Easy Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. 29. Sales. B. E. Investment in Strickland Company. Cost of goods sold. Inventory. 5-56 . Cost of goods sold. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Easy Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. 30. D. Carter Company. at a profit during 2010. Inventory. C. Retained earnings. D. B. D. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Investment in Strickland Company. C. In the consolidation worksheet for 2010. In the consolidation worksheet for 2010.Consolidated Financial Statements . Investment in Strickland Company. 5-57 . Inventory. Cost of goods sold. E. Retained earnings.Intra-Entity Asset Transactions 31. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Sales. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Cost of goods sold. E. B. Sales. 32.Chapter 05 . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Inventory. B. at a profit during 2010. In the consolidation worksheet for 2011. E.Intra-Entity Asset Transactions 33. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. Fisher Company. D. B. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. assuming Carter uses the initial value method of accounting for its investment in Strickland. C. Retained earnings. Sales. 5-58 . D. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. E. Retained earnings. Walsh Company sells inventory to its subsidiary. 34. Inventory. Investment in Strickland Company. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A.Chapter 05 . Cost of goods sold. In the consolidation worksheet for 2011. Cost of goods sold.Consolidated Financial Statements . assuming Carter uses the initial value methd of accounting for its investment in Strickland. Sales. Inventory. Investment in Strickland Company. C. Retained earnings. which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory? A. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Easy Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. Investment in Fisher Company. C. D. B. Sales.Chapter 05 . Cost of goods sold. B. Retained earnings. 36. In the consolidation worksheet for 2010. Sales.Intra-Entity Asset Transactions 35. which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory? A. Inventory. Inventory. C. In the consolidation worksheet for 2010. Cost of goods sold. Investment in Fisher Company. E. E. 5-59 .Consolidated Financial Statements . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Easy Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. D. C.Consolidated Financial Statements . Sales. Investment in Fisher Company. Retained earnings. Cost of goods sold. Inventory.Chapter 05 . B. C. E. E. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. 38. D. Cost of goods sold. Sales. Inventory. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A.Intra-Entity Asset Transactions 37. In the consolidation worksheet for 2010. In the consolidation worksheet for 2010. B. D. Investment in Fisher Company. 5-60 . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Retained earnings. Retained earnings. which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Investment in Fisher Company.Intra-Entity Asset Transactions 39. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. Inventory. which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A. Cost of goods sold. Sales. C. B.Consolidated Financial Statements . Retained earnings. D. 40. Cost of goods sold. Investment in Fisher Company. E. D.Chapter 05 . C. B. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. Sales. E. 5-61 . In the consolidation worksheet for 2011. Inventory. In the consolidation worksheet for 2011. before the noncontrolling interest.Intra-Entity Asset Transactions 41. Income from subsidiary will be lower by the amount of the beginning inventory profits multiplied by the noncontrolling interest percentage for upstream transfers. D. Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit. Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers.Chapter 05 . Income from subsidiary will be the same for upstream and downstream profit. C. E. 42. Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Hard Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. which of the following statements is true when there is a noncontrolling interest? A. B. before the effect of the noncontrolling interest. When comparing the difference between an upstream and downstream transfer of inventory. which of the following statements is true when there is a noncontrolling interest? A. and using the initial value method. before the effect of the noncontrolling interest. Income from subsidiary will be reduced for downstream ending inventory profits but not for upstream profits. B. When comparing the difference between an upstream and downstream transfer of inventory.Consolidated Financial Statements . C. Income from subsidiary will be higher by the amount of the beginning inventory profits multiplied by the noncontrolling interest percentage for upstream transfers. before the noncontrolling interest. E. D. Income from subsidiary will be reduced for upstream ending inventory profits but not for downstream profits. Income from subsidiary will be the same for upstream and downstream profits. and using the initial value method. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Hard Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit. 5-62 . This procedure is appropriate even if all the intra-entity transactions unsold at year-end may not be sold in the next year.Intra-Entity Asset Transactions 43. 5-63 . These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. B. E. A loss is always recognized but a gain is eliminated in a consolidated income statement. A loss and a gain are always recognized in a consolidated income statement.Consolidated Financial Statements . E. using the initial value method? A. Which of the following statements is true regarding inventory transfers between a parent and its subsidiary. A gain or loss is eliminated by adjusting stockholders' equity through comprehensive income. A loss and a gain are always eliminated in a consolidated income statement. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. A gain is always recognized but a loss is eliminated in a consolidated income statement. B. C. Noncontrolling interest in subsidiary's net income should not be reduced for upstream or downstream ending inventory profits. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. Merchandise transfers from a parent to its subsidiary that have not been sold to unaffiliated parties should be included in consolidated inventory at their transfer price. This procedure is inappropriate because all the intra-entity transactions unsold at year-end may not be sold in the next year.Chapter 05 . D. The sale of merchandise between a parent and its subsidiary represents an arm's-length transaction and thus provides the basis for the recognition of profit on such transfers. C. D. Which of the following statements is true regarding an intra-entity sale of land? A. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. 44. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. The subsidiary sold the land externally for a gain in 2011. No gain will be reported in the 2011 consolidated income statement. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. regardless of the method used account for the investment. D. The subsidiary will report a gain in 2008. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. An intra-entity sale took place whereby the transfer price exceeded the book value of a depreciable asset. C. A gain will be reported in the consolidated income statement in 2011.Intra-Entity Asset Transactions 45. B. A worksheet entry is made with a debit to retained earnings for a downstream transfer. Which statement is true for the year following the sale? A. 5-64 . Which of the following statements is true? A.Consolidated Financial Statements . Only the parent company will report a gain in 2011. E. C. A worksheet entry is made with a debit to gain for a downstream transfer.Chapter 05 . Parent sold land to its subsidiary for a gain in 2008. B. 46. E. A worksheet entry is made with a debit to gain for an upstream transfer. No worksheet entry is necessary. D. A gain will be reported in the consolidated income statement in 2008. A worksheet entry is made with a debit to retained earnings for an upstream transfer. A worksheet entry is made with a debit to retained earnings for a downstream transfer. B. B. Which statement is true for the year following the sale? A. An intra-entity sale took place whereby the transfer price was less than the book value of a depreciable asset. No worksheet entry is necessary. E. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer. D. Which statement is true for the year following the sale? A. D. regardless of the method used to account for the investment. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Hard Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method. 48. C. C.Consolidated Financial Statements . A worksheet entry is made with a credit to retained earnings for an upstream transfer.Intra-Entity Asset Transactions 47. No worksheet entry is necessary. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. E. 5-65 .Chapter 05 . A worksheet entry is made with a debit to retained earnings for an upstream transfer. An intra-entity sale took place whereby the book value exceeded the transfer price of a depreciable asset. A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer. E. Noncontrolling interest in subsidiary's net income is never affected by a gain on the transfer. sells inventory to Posito at a 25% profit on selling price. Noncontrolling interest in subsidiary's net income is affected only when the transfer is upstream. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. The following data are available pertaining to Gargiulo's income and dividends. Noncontrolling interest in subsidiary's net income is increased by an upstream gain in the year of transfer. Assume the equity method is used. 2010. B. Gargiulo Company. D.Intra-Entity Asset Transactions 49. Noncontrolling interest in subsidiary's net income is affected by a downstream gain only. The following data are available pertaining to intra-entity purchases.Chapter 05 . 5-66 . C. a 90% owned subsidiary of Posito Corporation. Noncontrolling interest in subsidiary's net income is always affected by a gain on the transfer. Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. Gargiulo was acquired on January 1. Which of the following statements is true concerning an intra-entity transfer of a depreciable asset? A.Consolidated Financial Statements . $62.500. $75. B. $62. Compute the equity in earnings of Gargiulo reported on Posito's books for 2010. Compute the equity in earnings of Gargiulo reported on Posito's books for 2011. $75. $76.000. D.730.700.270. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. $63. 51. C. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. $75.Chapter 05 . B. 5-67 . A. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. E.130. $70. $63.600.870.000. A.Intra-Entity Asset Transactions 50.Consolidated Financial Statements .800. C. E. $77. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. $7.825.925.030. $84.Intra-Entity Asset Transactions 52. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances.000. $6. 5-68 .850.970.270.600. A. $84. Compute the equity in earnings of Gargiulo reported on Posito's books for 2012. B. 53. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.Chapter 05 .375. B.230. Compute the noncontrolling interest in Gargiulo's net income for 2010. $84. $6. $6. C.Consolidated Financial Statements . E. E. $83. $7. $84. C. A. D. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. D. D. $9. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. $8.485. $8.Intra-Entity Asset Transactions 54. A. B.425.400.325. Compute the noncontrolling interest in Gargiulo's net income for 2011. $8. B. C.500. C.430.375. E. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. $9. $7.Chapter 05 . 5-69 . $8. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. 55. $9. E.Consolidated Financial Statements .570. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. Compute the noncontrolling interest in Gargiulo's net income for 2012. $8. A. $9.400.580. C. $270. $3.000. For consolidation purposes. $300.Chapter 05 . $1. B. 57. E. $1. 5-70 . $2.400. B. $2.000. $240. For consolidation purposes. C. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. D.000. D. $800.600. what amount would be debited to cost of goods sold for the 2011 consolidation worksheet with regard to the unrealized gross profit of the 2011 intraentity transfer of merchandise? A. $900.Intra-Entity Asset Transactions 56. what amount would be debited to cost of goods sold for the 2010 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise? A. E.Consolidated Financial Statements . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. $300. For consolidation purposes. $240. what amount would be debited to January 1 retained earnings for the 2010 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise? A. $0.Consolidated Financial Statements . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. E. $3. $675.600.Intra-Entity Asset Transactions 58. C. C. D. $750. $3. $1. $270. B.760.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. $600.Chapter 05 . B. 5-71 . what amount would be debited to cost of goods sold for the 2012 consolidation worksheet with regard to the unrealized gross profit of the 2012 intraentity transfer of merchandise? A. 59. For consolidation purposes. E. D. 600. what amount would be debited to January 1 retained earnings for the 2012 consolidation worksheet entry with regard to the unrealized gross profit of the 2011 intra-entity transfer of merchandise? A.000 and cost of goods sold of $7. C. During the year.500. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption.400. $2. $300. Patti reports sales of $10.000 and cost of goods sold of $160. Shannon has sales of $200. $3.Intra-Entity Asset Transactions 60. B.Chapter 05 . what amount would be debited to January 1 retained earnings for the 2011 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise? A. D. Patti Company owns 80% of the common stock of Shannon. Patti sold merchandise to Shannon for $60.000. At the end of the year. 61.000. $240. $1. $270. $2. $900. Shannon still possesses 30 percent of this inventory.000. For consolidation purposes.000 at a price based on the normal markup. In the current year. E. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. $1.000. C.Consolidated Financial Statements . Inc. B. $800. E. For the same period. D.000.000. For consolidation purposes. 5-72 . 000. $7.140. $10. except Shannon sold inventory to Patti. $10.500.000.000. Assume the same information. D.000. C.500. A. 64. $7. D. $10. Compute consolidated sales.Intra-Entity Asset Transactions 62. 63.000. $10. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. E.000. $7. Compute consolidated sales. $10.126.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. B.000.200. Compute consolidated cost of goods sold.000. C. E. B.000. $10.660. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.260.126.140.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. C.000. $7. 5-73 .Chapter 05 .615. D. E.200. B.000.000. $10.000.000.600. $10.Consolidated Financial Statements .604. A. $10.260. A. $10. $7. $1.000. Wilson realized that the useful life of the equipment was longer than originally anticipated. E. C. The equipment had a book value of $50. On April 1. 2010. 5-74 . B.500. A. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.250. bought the equipment from Wilson for $68.825. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.500. $2. a 90% owned subsidiary of Wilson Company. $18. $1. D.000. 66. D.250.Intra-Entity Asset Transactions Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80.950.Consolidated Financial Statements .500.750. $11. at ten remaining years. $37. C. E. 2010 Simon Company.250 and for depreciation purposes used the estimated remaining life as of that date.250. $19. Compute the amortization of gain through a depreciation adjustment for 2010 for consolidation purposes. B.Chapter 05 . The following data are available pertaining to Simon's income and dividends: 65. $38. 2010. On January 1.000 at January 1. A. $5. Compute the gain on transfer of equipment reported by Wilson for 2010. $1. E. 5-75 . 68.000.000. $1. C.000. $7. $1. $7.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.800. $90. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. $73. E. $1. D. B. $73. Compute the amortization of gain through a depreciation adjustment for 2011 for consolidation purposes. 69. B. $2. E. A. B.Consolidated Financial Statements . Compute the amortization of gain through a depreciation adjustment for 2012 for consolidation purposes. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.825. $1. Compute Wilson's share of income from Simon for consolidation for 2010. $72.500.925.000. D. $72. C.Intra-Entity Asset Transactions 67.950.500. $2.000. D.500.575. A. $1.825.Chapter 05 . $1. C. A. 5-76 . All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. Straight-line depreciation is used. $118.000. Smeder reported net income of $28. $115. $110.000. respectively. C. A. B. an 80% owned subsidiary of Collins. D. Smeder Company. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.000 and $32. C. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84. Compute Wilson's share of income from Simon for consolidation for 2011. $109. 2010. At the date of transfer.000.825.825.000. On January 1. B.000.800. A.000 less accumulated depreciation of $48. D. Inc. $106.Chapter 05 .000 cash. 71.Consolidated Financial Statements .000.. $118. $109. E. $119. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. Smeder's records carried the equipment at a cost of $120. $117. $108.000. E.000 for 2010 and 2011. Compute Wilson's share of income from Simon for consolidation for 2012.Intra-Entity Asset Transactions 70.800. Chapter 05 . E. Compute Collins' share of Smeder's net income for 2011. $18. $10.000. A. $27. $14. $12.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. D. B. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. $0. 74.Consolidated Financial Statements .000.400.200. D. 73. B.200. A. E. Compute Collins' share of Smeder's net income for 2010. $36.000. $11. $34. $24. D. C. $12.000.800.000. $34. A. Compute the gain recognized by Smeder Company relating to the equipment for 2010. C.000. 5-77 . $23.400. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.600. $12. $27.Intra-Entity Asset Transactions 72. B.600. E. C. What is the net effect on consolidated net income in 2010 due to the equipment transfer? A.000. E. D. for $75. Increase $2. Decrease $14. E. respectively. Debit accumulated depreciation. $48. Leo uses the equity method to account for its investment. 5-78 .000. $46. C. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.000. Decrease $12.000 and $140. 2010. purchased land from Leo on March 1.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. Decrease $10.000. Credit accumulated depreciation. B. 76. Increase $10. what net debit or credit will be made for the year 2010 relating to the accumulated depreciation for the equipment transfer? A. For consolidation purposes. $2. Credit accumulated depreciation.000.000. $46.000.Intra-Entity Asset Transactions 75. an 80% owned subsidiary of Leo Company. Debit accumulated depreciation.000.Consolidated Financial Statements .000.000.000. Stiller reported net income of $125. The land originally cost Leo $60. Stiller Company. Debit accumulated depreciation.Chapter 05 .000 for 2010 and 2011. $48. D. C. B. On a consolidation worksheet.000. B. what adjustment would be made for 2010 regarding the land transfer? A.Intra-Entity Asset Transactions 77. Compute the gain or loss on the intra-entity sale of land.000 loss.000. $50. Credit gain for $15. $50. A.000 gain. E. $15.000 loss. D.000. Debit gain for $50. C. $65. Credit land for $15. Debit land for $15.Consolidated Financial Statements . D.000 gain. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.000. 78.000 gain. 5-79 . E. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. Credit gain for $50. $15.000. C.Chapter 05 . B. Compute income from Stiller on Leo's books for 2010.000. C.000. E. D. $100. $125.000.000. D. Debit retained earnings for $50. $125.000. Credit retained earnings for $50.Intra-Entity Asset Transactions 79. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.Consolidated Financial Statements . Debit retained earnings for $15. $97.000.Chapter 05 . $85.000. 5-80 . Debit investment in Stiller for $15. C. $140. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. Compute income from Stiller on Leo's books for 2011.000. B. 80. $110. C. $88. B.000. A.000. 81. E.000. B. A. D.000. E. On a consolidation worksheet. $112.000. having used the equity method. what adjustment would be made for 2011 regarding the land transfer? A.000. $100. Credit retained earnings for $15. Inc. $5. Credit loss for $5.000 for 2010.000. $180. Which of the following will be included in a consolidation entry for 2010? A. C. B.000. 82. B. E. A. 83.000. D.000 gain. Stark reported net income of $200.000.000 gain.000 loss.000 in 2012. for $80. sold land to Parker on May 1. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. Parker sold the land it purchased from Stark in 2010 for $92. respectively.000.000. C. $85.Consolidated Financial Statements . $80.Chapter 05 . Credit land for $5.000. 5-81 . AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.000.000 loss. and $220. Debit gain for $5. The land originally cost Stark $85. a 90% owned subsidiary of Parker. 2011. Credit gain for $5. E.000. Compute the gain or loss on the intra-entity sale of land..000 loss. and 2012. D. $80.Intra-Entity Asset Transactions Stark Company. $5. 2010. Debit loss for $5. 500.000. $162. D.000. Credit land for $5. $205. Credit retained earnings for $5. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. $184. B.000.000. C. E. $180. B. E.000.000. Compute income from Stark reported on Parker's books for 2010.500. 5-82 . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. $180.000. $175. B. Debit investment in subsidiary for $5. $185. D.000. Compute income from Stark reported on Parker's books for 2011. $157.500.Intra-Entity Asset Transactions 84. C. 85. Which of the following will be included in a consolidation entry for 2011? A.Consolidated Financial Statements .000. Debit retained earnings for $5. Credit investment in subsidiary for $5. A.Chapter 05 .500.000. E. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. C. 86.000. $166. $200. A. 000 gain. Compute the gain or loss relating to the land that will be reported in consolidated net income for 2012.000 loss. 89. $5. $5. $5. C.000 gain. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.000 gain. B. D. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. $7. D. E. $0.000 gain.000 gain.000 loss.000 loss. $12.000 loss.000 gain. $7. C. Compute Parker's reported gain or loss relating to the land for 2012.000 loss. A. $7. B.000 loss. $7. A. $12. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. $12.Intra-Entity Asset Transactions 87. E. A. D. 5-83 .000 loss. $12.000 loss.Consolidated Financial Statements . $7. B. E. $7. Compute Stark's reported gain or loss relating to the land for 2012. $5. 88.Chapter 05 . C. 000 gain. $202. D.000 and accumulated depreciation of $66. E.500. The equipment had a cost of $120. Pepe. 5-84 . Compute income from Stark reported on Parker's books for 2012.000 gain. $21. C.000 with a remaining life of 9 years.700. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.Chapter 05 . $9. On that date Devin sold equipment to Pepe for $45. $193. $54.300. Devin reported net income of $300.000 and $325. $198. $191. C.000 for 2010 and 2011. 91. $21. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. B.000 loss. respectively. E.500. Pepe uses the equity method to account for its investment in Devin.000.000. $9.000 loss. B. $204. 2010.000 gain. D. What is the gain or loss on equipment reported by Devin for 2010? A. A. Incorporated acquired 60% of Devin Company on January 1.Consolidated Financial Statements .Intra-Entity Asset Transactions 90. $171. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. $187.000 gain.000. $194. $190. C.Intra-Entity Asset Transactions 92.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.200.400. A. D. $180. $0. C.000 loss.600.000.800. B.000. C.000 loss.Chapter 05 . AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. 93. $196. $21. Compute the income from Devin reported on Pepe's books for 2011. What is the consolidated gain or loss on equipment for 2010? A. $9. $174.Consolidated Financial Statements . $172. 5-85 . B. D. $195.000 gain. E. $9. $21. 94.000. B. A. E.000. Compute the income from Devin reported on Pepe's books for 2010. D. $184. E. $129.400.200.Chapter 05 . B. E. $130. B. A. $120. $112. D. Compute the noncontrolling interest in the net income of Devin for 2011. C. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. D.000. $126. E. A. $120.Intra-Entity Asset Transactions 95. 96. $130.000. $116. Compute the noncontrolling interest in the net income of Devin for 2010. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. $122.400.Consolidated Financial Statements .000.600. $123. C. 5-86 .000.800.000. Upstream ending inventory profit. where subsidiary recognizes a loss.Intra-Entity Asset Transactions Matching Questions 97. in the period after transfer. using the initial value method. 5-87 . where parent recognizes a gain. recorded under the equity method. in the period after transfer. For each of the following situations (1 . 1. select the correct entry (A . Eliminate income from subsidiary. Downstream transfer of depreciable assets. using the initial value method. using the initial value method. using the initial value method. Upstream transfer of depreciable assets. Credit retained earnings 5. Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption.Consolidated Financial Statements . Debit retained earnings 4. Credit investment in subsidiary 9. None of the above 10. Downstream transfer of land.Chapter 05 . where parent recognizes a loss. using the initial value method. Debit retained earnings 3. Debit retained earnings 6. where subsidiary recognizes a gain. Downstream beginning inventory profit. 10 AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Hard Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.10). in the period after transfer. recorded under the equity method. Upstream transfer of land. Downstream ending inventory profit. Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. Debit investment in subsidiary Upstream beginning inventory profit. Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. Credit retained earnings 8.E) that would be required on a consolidation worksheet. Debit retained earnings 7. using the initial value method. using the initial value method. 2 2 1 1 2 2 4 4 8 Eliminate recorded amortization of acquisition fair value over book value. None of the above 2. using the initial value method. in the period after transfer. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. sold inventory to Leeward Co. Pate Corp. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. From a consolidated point of view. 5-88 . 99. Throughout 2011.. From a consolidated point of view. its subsidiary. when will the gain on this transfer be earned? The gain is earned when Leeward uses the goods or sells them to a third party.. sold land to Shannahan Co.Chapter 05 . when will the gain on this transfer actually be earned? The gain is earned when Shannahan sells the land to a third party. Cleveland Co.Intra-Entity Asset Transactions Essay Questions 98. its subsidiary.Consolidated Financial Statements . 2011. On April 7. The consolidation entry must reduce land to its cost. on January 1. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. Varton owned some land with a book value of $84. Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2011? A sale of inventory by a subsidiary to its parent is more accurately understood as a transfer within the entity. How should this transaction be accounted for by the consolidated entity? Caleb and Varton are in substance one entity. Varton Corp. 2011. No gain on the transfer should be recognized in the consolidated financial statements since the earnings process is not complete. Forsyth Corp. 101. 5-89 . Also. the earnings process was not yet complete. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. If recognition of the gross profit on the transfer was allowed. Because Caleb recognized a gain in its income statement. Forsyth still owned all of the inventory at the end of 2011.Consolidated Financial Statements .Chapter 05 .Intra-Entity Asset Transactions 100. acquired all of the voting common stock of Caleb Co. Edwards Co. the consolidation process must eliminate the gain. the parent would be able to manipulate consolidated net income and consolidated net assets by transferring inventory between parent and subsidiary. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. During 2011.000 that was sold to Caleb for its fair value of $120. although in legal form they are separate. sold inventory to its parent company. Caleb's separate balance sheet showed the land at an amount greater than its cost to the combined entity.000. The "sale" of land by Varton should be regarded as a transfer of assets within the entity. Since Forsyth still owned the inventory at the end of the year. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. How does a gain on an intra-entity sale of equipment affect the calculation of a noncontrolling interest? If the equipment is sold by the parent to the subsidiary. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. and this elimination may be allocated between the controlling interest and noncontrolling interest share of the subsidiary's earnings. The gain on goods that the parent still owns should be deducted from the subsidiary's income and this elimination may be allocated between the controlling interest and the noncontrolling interest's share of the subsidiary's earnings. the gain on the sale is associated with the subsidiary.Chapter 05 . When the sale is upstream (from the subsidiary to the parent).Consolidated Financial Statements . 5-90 .Intra-Entity Asset Transactions 102. the sale of the equipment does not affect the calculation of the noncontrolling interest's share of the subsidiary's net income. 103. How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation? If the sale of inventory is downstream (from parent to subsidiary). any unrealized gain on the sale does not affect the calculation of noncontrolling interest. When the sale of equipment is upstream. the gain on the sale must be subtracted from the subsidiary's income. Also.Intra-Entity Asset Transactions 104. How is the gain on an intra-entity transfer of a depreciable asset realized? The gain on an intra-entity transfer of a depreciable asset may be realized in one of two ways: (1) through the use of the asset in operations or (2) through the sale of the asset to an independent third party. No consolidation entry for the sale of the land was made at the end of 2011.Consolidated Financial Statements . AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. During 2011. on January 1. the correction for gain may be allocated to the noncontrolling interest share of subsidiary earnings and the noncontrolling interest balance on the consolidated balance sheet. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities.Chapter 05 . What errors will this omission cause in the consolidated financial statements? Consolidation Entry for 2011 Gain on Sale of Land XXX Land XXX This omission causes both the amounts for Land and Gain on Sale of Land to be overstated in the consolidated financial statements. and ultimately. acquired all of the common stock of Bumstead Corp. 105. 5-91 . 2011. Dithers Inc. Total Assets and Ending Retained Earnings to be overstated as well. Bumstead sold land to Dithers at a gain. the entire $200. When preparing consolidated financial statements. 107. Why do intra-entity transfers between the component companies of a business combination occur so frequently? One reason for the significant volume and frequency of intra-entity transfers is that many business combinations are specifically organized so that the companies can provide products for each other. and bought $200. owns 90 percent of Richards. Thus. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 05-01 Understand that intra-entity asset transfers often create accounting effects within the financial records of affiliated companies that must be eliminated or adjusted in preparing consolidated financial statements. Inc.000 of Richards' inventory in 2011. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. 5-92 .000 was simply an intraentity asset transfer for consolidation purposes. the $200.Chapter 05 . The transfer price was equal to 30 percent of the sales price.000 should be eliminated from both the Sales and the Purchases (Inventory) accounts. what amount of these sales is eliminated? Regardless of the ownership percentage or the markup. within the consolidation process.Consolidated Financial Statements . This design is intended to benefit the business combination as a whole because of the economies provided by vertical integration. Fraker.Intra-Entity Asset Transactions 106. Inc. more profit can often be generated by the combination if one member is able to buy from another rather than from an outside party. In effect. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. the unrealized gain must again be eliminated within the consolidation process. a transfer price is often established that exceeds the cost of the inventory. This second reduction is made on the worksheet to the beginning inventory component of cost of goods sold as well as to the beginning retained earnings balance of the original seller. What is the impact on the noncontrolling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies? None. the seller is recording a gain on its books that. this consolidation procedure is carried out by removing the unrealized gain from the inventory account on the balance sheet and from the ending inventory balance within cost of goods sold. For the year of transfer. the adjustment in the subsequent year must be made to the equity in subsidiary earnings account rather than to retained earnings.Intra-Entity Asset Transactions 108. and how are they treated on a consolidation worksheet? In intra-entity transactions.Consolidated Financial Statements . Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. remains unrealized until the asset is consumed or sold to an outside party. The gain is being moved into the year of realization. Hence. If the transfer was downstream in direction and the parent company has applied the equity method. In the year following the transfer (if the goods are resold or consumed). from the perspective of the business combination as a whole. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. Any unrealized gain on merchandise still being held by the buyer must be eliminated whenever consolidated financial statements are produced. 109. What is meant by unrealized inventory gains. 5-93 .Chapter 05 . Chapter 05 . 111. What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset? Depreciable assets are often transferred between the members of a business combination at amounts in excess of book value. From the perspective of the business combination. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. The gain on the intra-entity transfer is deferred until the time of that third-party sale.Consolidated Financial Statements . AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.Intra-Entity Asset Transactions 110. depreciation should be calculated solely on historical cost figures. within the consolidation process for each period. When is the gain on an intra-entity transfer of land realized? The gain on an intra-entity transfer of land is realized when the asset is sold to an independent third party. adjustment of the depreciation (recorded by the buyer) is necessary to reduce the expense to a cost based figure. 5-94 . The buyer will then compute depreciation expense based on this inflated transfer price rather than on an historical cost basis. Thus. King sells inventory to James for $500. During the year.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. For the same period. Stodd sold merchandise to Tara for $40. King Corp. At the end of the year. 25% of the goods were still in James' inventory. During 2011. Stodd has sales of $500. 5-95 . Prepare the consolidation entry to defer the unrealized gain. Tara reports sales of $5.000 and cost of goods sold of $3.000.500. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. At 12/31/11. King uses the equity method to account for this investment. owns 85% of James Co. Required: Prepare the Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet. Tara still possesses 20 percent of this inventory. The inventory originally cost King $420.000. Tara Company owns 80 percent of the common stock of Stodd Inc. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.000 and cost of goods sold of $400.Consolidated Financial Statements .000.Chapter 05 . 113.Intra-Entity Asset Transactions 112.000 at a price based on the normal markup. In the current year.000. acquired all of Rubble Co.000 inventory with a cost of $500. Flintstone decided to use the initial value method to account for this investment. Flintstone Inc. Required: Prepare Consolidation Entry TI for the intra-entity transfer and Consolidation Entry G for the ending inventory adjustment necessary for the consolidation worksheet at 12/31/11.Intra-Entity Asset Transactions 114. During 2011.Chapter 05 .000. on January 1. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. At the end of the year 30% of the goods were still in Rubble's inventory. Flintstone sold to Rubble for $600.Consolidated Financial Statements . 2011. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. 5-96 . Yoderly Co.Intra-Entity Asset Transactions 115.000. Strayten sold Quint goods which had cost $48. is a wholly owned subsidiary of Quint Inc.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. 5-97 . Strayten Corp. During 2010. Quint decided to use the initial value method to account for this investment. 116.. sold goods to Nelson near the end of 2011.. which would have to be recorded at the end of 2011.000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. The goods had cost Yoderly $105.000 and the selling price was $140. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Required: Prepare Consolidation Entry *G. Nelson had not sold any of the goods by the end of the year. The selling price was $64. Required: Prepare Consolidation Entry TI and Consolidation Entry G that are required for 2011. a wholly owned subsidiary of Nelson Corp. Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years.Consolidated Financial Statements .Chapter 05 . Quint still had one-eighth of the goods on hand at the end of the year. Consolidated Financial Statements . Stroban's reported net income for 2011 was $119.Intra-Entity Asset Transactions 117.000. The land had a book value of $82. Required: What was the noncontrolling interest's share of Stroban Co.'s net income? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. Hambly Corp. owned 80% of the voting common stock of Stroban Co. 5-98 . Learning Objective: 05-06 Prepare the consolidation entry to remove any unrealized gain created by the intra-entity transfer of land from the accounting records of the year of transfer and subsequent years. During 2011.000 and was sold to Hambly for $145. Stroban sold a parcel of land to Hambly.Chapter 05 .000. Consolidated Financial Statements . Lawler still held 30% of the inventory. By the end of 2010. Required: How should the sale between Lawler and Ritter be accounted for in a consolidation worksheet? Show worksheet entries to support your answer. and Lawler Co. At the end of 2011.000. Lawler and Ritter are related parties since they are both part of a combined entity. Both companies use the perpetual inventory method. The gross profit rate was 30% of the selling price. Ritter sold inventory to Lawler. and (3) reduce consolidated inventory to its cost to the combined entity. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. The goods had cost Ritter $65.Intra-Entity Asset Transactions 118. The following consolidation entries should be prepared: These entries (1) eliminate the sale from the consolidated income statement. (2) decrease cost of goods sold. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory.Chapter 05 . and they were sold to Lawler for $100. owned all of the voting common stock of Stateside Co. owned all of the voting common stock of both Ritter Co. During 2010. Virginia Corp. and Virginia decided to use the partial equity method to account for this investment. McGraw Corp. Virginia made cash sales of $400.000 to Stateside. 5-99 .000 cash. Stateside had sold 75% of the goods to outside parties for $420.000. During 2011. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory.Chapter 05 . 5-100 . Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2010.Consolidated Financial Statements .Intra-Entity Asset Transactions 119. Prepare any 2011 consolidation worksheet entries that would be required regarding the 2010 inventory transfer.Chapter 05 . Prepare the consolidation entries that should be made at the end of 2010. 121. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period.Consolidated Financial Statements . AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. 5-101 .Intra-Entity Asset Transactions 120. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. Chapter 05 . 2011: 5-102 . Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction.Intra-Entity Asset Transactions Several years ago Polar Inc. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values.Consolidated Financial Statements . The following selected account balances were from the individual financial records of these two companies as of December 31. acquired an 80% interest in Icecap Co. Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 122. Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 2010 and $165,000 in 2011. Of this inventory, $39,000 of the 2010 transfers were retained and then sold by Icecap in 2011 while $55,000 of the 2011 transfers were held until 2012. Required: For the consolidated financial statements for 2011, determine the balances that would appear for the following accounts: (1) Cost of Goods Sold, (2) Inventory, and (3) Noncontrolling Interest in Subsidiary's Net Income. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. 5-103 Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions 123. Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $70,000 in 2010 and $112,000 in 2011. Of this inventory, $29,000 of the 2010 transfers were retained and then sold by Polar in 2011 whereas $49,000 of the 2011 transfers were held until 2012. Required: For the consolidated financial statements for 2011, determine the balances that would appear for the following accounts: (1) Cost of Goods Sold, (2) Inventory, and (3) Noncontrolling Interest in Subsidiary's Net Income. 5-104 Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset Transactions AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-02 Prepare the consolidation entry to eliminate the sales and purchases balances that are created by the intraentity transfer of inventory. Learning Objective: 05-03 Prepare the consolidation entry to eliminate any intraentity inventory gross profit that remains unrealized at (a) the end of the year of transfer and (b) the beginning of the subsequent period. Learning Objective: 05-04 Understand that the consolidation process for inventory transfers is designed to defer the unrealized portion of an intra-entity gross profit from the year of transfer into the year of disposal or consumption. Learning Objective: 05-05 Understand the difference between upstream and downstream intra-entity transfers and how each affects the computation of noncontrolling interest balances. 5-105 000 on that date.Consolidated Financial Statements . and (3) Noncontrolling Interest in Subsidiary's Net Income. although the book value of this asset was only $70.Intra-Entity Asset Transactions 124. 2010 for $112. determine the balances that would appear for the following accounts: (1) Buildings (net).Chapter 05 . AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. (2) Operating expenses. Polar sold a building to Icecap on January 1. 5-106 . Required: For the consolidated financial statements for 2011.000. The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value. 000 in net income in 2011 (not including any investment income) while Matin reported $126.000. What is consolidated net income for 2011? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. the equipment had a five-year remaining life. The equipment originally cost $140. (a wholly-owned subsidiary) for $168. 5-107 . On that date.000 but had a book value of only $98.000 when transferred. Assume there is no amortization related to the original investment. Musial Corp. 125.Chapter 05 . Depreciation expense was calculated using the straight-line method. 2011. Musial earned $308.000 in cash.Consolidated Financial Statements . sold equipment to Matin Inc.Intra-Entity Asset Transactions On January 1. Chapter 05 . 5-108 . what is consolidated net income for 2009? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 05-07 Prepare the consolidation entries to remove the effects of upstream and downstream intra-entity fixed asset transfers across affiliated entities. 127. Assuming that Musial owned only 90% of Matin.Intra-Entity Asset Transactions 126. Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2011.Consolidated Financial Statements . assuming that Musial owned only 90% of Matin and the equipment transfer had been upstream.