ACCT 405 WEEK 5 HOMEWORK LATEST
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ACCT 405 Week 5 Homework Latest
ACCT405
ACCT 405 Week 5 Homework Latest
Chapter 5: Problems: 1, 2, 3, 9, and 16
Chapter 6: No assigned problems
1. What is the primary reason we defer financial statement
recognition of gross profits on intra-entity sales for goods that remain within
the consolidated entity at year-end?
2. King Corporation owns 80 percent of Lee Corporation’s
common stock. During October, Lee sold merchandise to King for $100,000. At
December 31, 50 percent of this merchandise remains in King’s inventory. Gross
profit percentages were 30 percent for King and 40 percent for Lee. The amount
of unrealized intra-entity profit in ending inventory at December 31 that should
be eliminated in the consolidation process is
3. In computing the noncontrolling interest’s share of
consolidated net income, how should the subsidiary’s net income be adjusted for
intra-entity transfers?
9. Wallton Corporation owns 70 percent of the outstanding
stock of Hastings, Incorporated. On January 1, 2011, Wallton acquired a
building with a 10-year life for $300,000. Wallton anticipated no salvage
value, and the building was to be depreciated on the straight-line basis. On
January 1, 2013, Wallton sold this building to Hastings for $280,000. At that
time, the building had a remaining life of eight years but still no expected
salvage value. In preparing financial statements for 2013, how does this
transfer affect the computation of consolidated net income?
16. Following are several figures reported for Preston and
Sanchez as of December 31, 2013:
Preston acquired 70 percent of Sanchez in
January 2012. In allocating the newly acquired subsidiary’s fair value at the
acquisition date, Preston noted that Sanchez had developed a customer list
worth $65,000 that was unrecorded on its accounting records and had a five-year
remaining life. Any remaining excess fair value over Sanchez’s book value was
attributed to goodwill. During 2013, Sanchez sells inventory costing $120,000
to Preston for $160,000. Of this amount, 20 percent remains unsold in Preston’s
warehouse at year-end. For Preston’s consolidated reports, determine the
following amounts to be reported for the current year.
- Inventory
- Sales
- Cost of Goods Sold
- Operating Expenses
- Noncontrolling Interest in the Subsidiary’s Net Income
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