Multiple Inventory Transfers between Parent and Subsidiary
Proud Companyt and Slinky Company both produce and purchase equipment for resale each period and frequently sell to each other.
Since Proud Company holds 60 percem ownership of Slinky Company, Proud's controller compiled the following information with regard to intercompany trasaction between the two companies in 20X5 and 20X6:
|
|
|
|
|
|
Percent Resold |
|
|
|
|
|
|
Produced |
|
Sold |
|
to Nonaffliliate in |
|
Cost to |
|
Sale Price |
| Year |
|
by |
|
To |
|
20X5 |
20X6 |
|
Procedure |
|
to Affiliate |
| 20X5 |
|
Proud Co. |
|
Slink Co |
|
60% |
40% |
|
$100,000 |
|
$150,000 |
| 20X5 |
|
Slinky Co. |
Proud Co |
|
30 |
50 |
|
70,000 |
|
100,000 |
| 20X6 |
|
Proud Co. |
|
Slinky Co |
|
|
90 |
|
40,000 |
|
60,000 |
| 20X6 |
|
Slinky Co. |
Proud Co |
|
|
25 |
|
200,000 |
|
240,000 |
Problem:
1) Give the eliminatin entreis required at December 31, 20X6. to eliminate the effects of the inventory transfers in preparing a full set of consolidated financial statements
2) Compute the amount of cost of goods to be reported in the consolidated income statement for 20X6.