Professional Documents
Culture Documents
1
1. Southern Materials owns 75 percent of Western Furnitures common stock. On
December 31, 2005, Southern sells a machine costing $65,000 with $15,000 accumulated
depreciation at the date of sale to Western for $36,000. What amount will be debited in
the December 31, 2005, worksheet elimination for the machine account as a result of this
transaction?
a. $15,000
b. $29,000
c. $14,000
d. $44,000
2. Petes Farm Equipment owns 60 percent of Donovans Agricultural Supply. Petes has
$1,000,000 of bonds payable outstanding with an unamortized discount of $38,000.
Donovans buys $400,000 of the bonds from an unrelated party for $360,000. What is the
amount of worksheet elimination at the end of the year of the investment with regard to
the Loss or Gain on Early Retirement of Debt?
a. $24,800 loss
b. $2,000 gain
c. $24,800 gain
d. $2,000 loss.
EXERCISE -1
Montana Enterprises sold $25,000 of inventory to Idaho Industries for $40,000 during
2005. Idaho was still in possession of all the inventory at year-end. Montana owns 80
percent of Idahos stock.
Required:
EXERCISE -2
Broadcasting Enterprises purchased $100,000 of inventory from its subsidiary, Cable
Company, when the inventory was carried on the financial records of Cable for
$75,000. Broadcasting sold 60 percent of this inventory to unrelated parties during the
same period for $70,000. During the period, Broadcasting recorded sales and cost of
goods sold of $2,500,000 and $1,500,000, respectively. Also, Cable recorded sales
and cost of goods sold of $850,000 and $400,000, respectively. Broadcasting owns 90
percent of Cables stock.
Required:
A. Prepare the intercompany inventory worksheet elimination needed to present
consolidated financial statements.
B. Determine the amounts that would be presented on the consolidated income
statement as Sales and Cost of Goods Sold.
C. What are the worksheet elimination adjustments to Retained Earnings and
Noncontrolling Interest (if applicable) in the next period regarding the above
intercompany inventory transaction?
EXERCISE -2
National Corporation sold equipment to Local Company on December 31, 2005, for
$24,000. The equipment was carried on the financial records of National at a cost of
$66,000, and accumulated depreciation was $44,000 at the time of the sale. The
equipment had an estimated remaining life of two years on the records of National
and was assigned an estimated remaining life of four years
when purchased by Local. Straight-line depreciation is used by National and Local.
National owns 100 percent of Locals stock.
Required:
A. Prepared the intercompany asset transaction worksheet elimination needed to
present the consolidated financial statements in 2005.
B. What would be presented on Nationals income statement, Locals income
statement, and the consolidated income statement for depreciation expense for 2005?
C. Prepare the intercompany asset transaction worksheet elimination needed to
present the consolidated financial statements in 2005, assuming all the values in the
problem exist at January 1, 2005.