Assignment task:
Joey Co. holds a 90% ownership interest in Legoria Co and uses the equity method to account for its investment in Legoria Co. Each year, Legoria Co. purchases metal used in producing golf clubs. Suppose Joey Co. sold metal priced at $5,000,000 to Legoria in 2023 and on December 31, 2023, Legoria' s ending inventory includes the $840,000 of inventory purchased from Joey. Joey's markup is 40 percent of the cost. All the $840,000 of inventory on hand at year end 2023 is subsequently sold by Legoria Company to external customers in 2024.
1) Give the Consolidated entries needed as of December 31, 2023, to remove all effects of the intercompany transfer in preparing the 2023 Consolidated Financial Statements.
2) Assume no intercompany sales of inventory from Joey Co. To Legoria Co. in 2024. What entry(s), if any, are required to prepare the Consolidated Financial statements in 2024 to remove the effects of the intercompany transfer of inventory in 2024?
3) Assume that the transactions above were upstream sales, how would the entries you recorded in parts 1 and 2 differ? Please describe. If an entry is different than what was recorded in parts 1 and 2 above, please record