PROBLEM 1.

During 2018, Frienne company (the

95%-owned subsidiary) sold merchandise to
Frielle at a gross profit margin of 20% on
sales price.
Sales by Frienne to Frielle totaled $120,000 in
year 2018, of which $40,000 remained unsold
by Frielle on 12/31/2018.
On 12/31/2018, Frielle still owed $30,000 to
Frienne for merchandise.

Assume that Frienne’s intercompany sales of

merchandise to Frielle Corporation during the
year ended 12/31/2019, are analyzed as
follows:

Gross Profit

Sellin Cost (25% of Cost;

g 20%Of Sellin
Price g Price)
Beginning inv $40,0 $32,000 $8,000
entories 00
Add: Sales 150,0 120,000 30,000
00
Subtotals $190, $152,00 $38,000
000 0
 Less: Ending

inventories 60,00 48,000 12,000

0
Cost of goods $130, $104,00 $26,000
sold 000 0

*Prepare necessary entries at 12/31/2018.

*Prepare any elimination entries required at
12/31/2019.

PROBLEM 2.The following data pertain to the

sale of inventory from Frielle(Parent) to
Frienne (Subsidiary).
Assume Frielle purchases 8,000 units of
inventory on November 10, 2018, at a cost of
$6 per unit. Frielle sells this inventory to
Frienne on December 30, 2018, for $8 per unit.
Assume that none of this inventory is sold by
Frienne to an unrelated party prior to
December 31.
Assume that during 2019 Frienne sold, to
unrelated parties, all 8,000 units of inventory
that had been acquired from Frielle on
December 30, 2018. The selling price was
$96,000.Frienne purchased an additional
18,000 units from Frielle for $9 per unit. These
goods also had cost Frielle $6 per unit. Of
the 18,000 units of inventory purchased by
Frienne in 2019, 14,000 units were sold to
unrelated parties in the same year for a total
of $168,000.

*Prepare necessary entries at 2018 year end.

*Prepare any elimination entries required at
2019 year end.

PROBLEM 3.Assume a machine was purchased

by Frielle on January 1, 2012, for $9,000. The
machine is being depreciated using the
straight-line method assuming a 10-year life
with no salvage value. The machine is sold to
Frienne for $6,000 on December 31, 2018.
Frielle records its 2018 depreciation expense
prior to the sale. At the date of the sale, six
years have passed since the purchase of the
machine.
Assume that in 2019 Frienne uses the
machine acquired from Frielle on December
31, 2018, and records depreciation as
appropriate.
*Prepare necessary entries at 2018 year end.
*Prepare any elimination entries for the
subsequent year.
PROBLEM 4.Assume that on 12/31/2018, Frielle
(the parent company) sold to Frienne (the 95%
owned subsidiary) a parcel of land costing
$125,000 for $175,000.
Assume that, Frienne sold the land to an
outsider for $200,000 in the year ended
12/31/2020.

*Prepare partial worksheet for the year ended

2018.
*Prepare appropriate entries for years
2018,2019 & 2020.

PROBLEM 5. Assume that Frienne (Subsidiary)

sells land to Frielle (Parent) for $15,000 more
than its book value.
*Prepare the appropriate entry to eliminate the
intercompany sale at the year of sale
assuming land is still unsold.
*Same case,prepare the appropriate entry for
the subsequent year.

PROBLEM 6.Assume that Frienne (the 95%

owned subsidiary) sold machinery to Frielle
(the parent) on 12/31/2018. Details of the
sale and depreciation policy of the
machinery are as follows:

Selling price of machinery to Fr $ 60,0

ielle Corp. 00
Cost of machinery to Frienne C
ompany
50,0
when acquired Jan. 2,2016 00
Estimated residual value:

To Frienne Company, Jan.2,2 $ 4,00

016 0
To Frielle Corporation, Dec. 3 4,00 *
1,2018 0 P
re
Economic life:
p
To Frienne Company, Jan.2,2 10 ye ar
016 ars e
To Frielle Corporation, Dec. 3 5 year n
1,2018 s e
c
Annual depreciation expense (s e
traight-line method): s
To Frienne Company ($46,00 $ 4,60 s
0 /10) 0 ar
To Frielle Corporation($56,00 11,2 y
0 /5) 00 e
nt
ries at 2018 year end.
*Prepare any elimination entries for the
subsequent year.

PROBLEM 1
Frielle Company
* Inventories 120,000
 Accounts Payable 120,000

* Accounts Payable 90,000

Cash 90,000

* Trade Accounts Receivable 100,000

Sales 100,000
* Cost of Goods Sold 80,000
Inventories 80,000

Frienne Company
*Accounts Receivable 120,000
Sales 120,000

*Cost of Goods Sold 96,000

Inventories 96,000

*Cash 90,000
Accounts Receivable 90,000

Eliminating Entries
2018 Sales 120,000
Cost of Goods Sold 112,000
Inventories 8,000
2019 Retained Earnings ($8,000 x 0.95)* 7,600

Non Controlling Interest 400

Sales 150,000
Cost of Goods Sold 146,000
Inventories 12,000

PROBLEM 2

Frielle Books

Cash 64,000
Sales (8,000 × $8) 64,000

Cost of Goods Sold (8,000 × $6) 48,000

Inventory 48,000

Frienne Books

Inventory 64,000
Cash 64,000

Eliminating Entries - 2018

Sales 64,000
Cost of Goods Sold 48,000
Inventory 16,000

Eliminating Entries - 2019

Sales 162,000
Retained Earnings (January 1, 2019) 16,000
Cost of Goods Sold 166,000
Inventory 12,000

PROBLEM 3

Frielle Company

*Machinery 60,000
Cash 60,000
Frienne Company
*Cash 60,000
Accumulated Depreciation($4,600 x 3) 13,800
Machinery 50,000
Gain on Sale 23,800

Elimination Entries- 2018

*Gain on Sale of Machinery 23,800

Machinery 23,800

Elimination Entries- 2019

* Retained Earnings ($23,800 x 0.95) 22,610

Non Controlling Interest 1,190
Accumulated Depreciation 4,760
Machinery 23,800
Depreciation Expense 4,760
 PROBLEM 4
Frielle Corporation
*Cash 175,000
Land 125,000
Gain on Sale of Land 50,000

Frienne Company
*Land 175,000
Cash 175,000

Eliminating Entries - 2018

*Gain on Sale of Land 50,000
Land 50,000

Eliminating Entries-2019
*Retained Earnings 50,000
Land 50,000

Sale on 2020
*Cash 200,000
Land 175,000
Gain on Sale of Land 25,000

Eliminating Entries-2020
*Retained Earnings 50,000
Gain on Sale of Land 50,000
 Frielle CORPORATION AND SUBSIDIARY
Partial Working Paper for Consolidated Financial Statements
For Year Ended December 31, 2018

Frielle Frienne C Elimina Consoli

Compan ompany tions In dated
y c. (Dec.
)
Income State
ment
Gain on sale
of Land
50,000 (50,000)
Balance She
et
Land

175,000 (50,000) 125,000

 PROBLEM 5
At year of sale
*Gain on Sale of Land 15,000
Land 15,000

SUBSEQUENT YEAR
*Retained Earnings, January 1 $12,000
Noncontrolling Interest $3,000
Land $15000

PROBLEM 6
Frielle Corporation
*Cash 6,000
Accumulated Depreciation ($900 × 6) 5,400
Gain on Sale of Machine 2,400 [$6,000
– ($9,000 – $5,400)]
Machine 9,000

Frienne Books
*Machine 6,000
Cash 6,000

Eliminating Entries- 2018

*Machine 3,000
Gain on Sale of Machine 2,400
Accumulated Depreciation 5,400

Eliminating Entries-2019
*Machine 3,000
Retained Earnings 2,400
Depreciation Expense 600
Accumulated Depreciation 4,800