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    Entry G

    Uploaded by

    McKenzie W
    The document discusses intra-entity transfers and how they affect consolidated financial statements. It provides journal entries to record intra-entity inventory transfers and the related unrealized gross profit. It also presents pro forma consolidated income statements for a parent company, Akron Inc., and its subsidiary, Toledo. The statements consolidate sales, costs of goods sold, operating expenses, and net income for the two entities after eliminating intra-entity transactions.

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    Entry G

    Uploaded by

    McKenzie W
    14 views2 pages
    The document discusses intra-entity transfers and how they affect consolidated financial statements. It provides journal entries to record intra-entity inventory transfers and the related unrealized gross profit. It also presents pro forma consolidated income statements for a parent company, Akron Inc., and its subsidiary, Toledo. The statements consolidate sales, costs of goods sold, operating expenses, and net income for the two entities after eliminating intra-entity transactions.

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    accounting

    Original Title

    5-22

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    © © All Rights Reserved

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    The document discusses intra-entity transfers and how they affect consolidated financial statements. It provides journal entries to record intra-entity inventory transfers and the related unrealized gross profit. It also presents pro forma consolidated income statements for a parent company, Akron Inc., and its subsidiary, Toledo. The statements consolidate sales, costs of goods sold, operating expenses, and net income for the two entities after eliminating intra-entity transactions.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    14 views2 pages

    Entry G

    Uploaded by

    McKenzie W
    The document discusses intra-entity transfers and how they affect consolidated financial statements. It provides journal entries to record intra-entity inventory transfers and the related unrealized gross profit. It also presents pro forma consolidated income statements for a parent company, Akron Inc., and its subsidiary, Toledo. The statements consolidate sales, costs of goods sold, operating expenses, and net income for the two entities after eliminating intra-entity transactions.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 2

    a.

    The direction of the intra-entity transfer does not matter for consolidated totals.
    However, NCI is affected by upstream sales and not downstream sales. In this problem
    there is no noncontrolling interest.

    Gross Profit %
    Intra-entity sales $ 320,000 Inventory still held $ 70,000
    Less: item cost $ (240,000) * GP % 25%
    = $ 80,000 = Unrealized Gross Profit 2020 $ 17,500
    / sales $ 320,000
    = Gross profit 25% Inventory still held $ 50,000
    * GP % 25%
    = Unrealized Gross Profit 2021 $ 12,500
    Journal
    Entry *G Removes PREVIOUS YEAR unrealized gross profit
    Retained Earnings $ 17,500
    COGS $ 17,500
    Entry E Annual amortization for current period
    Amortization Expense $ 15,000
    Patented Technology $ 15,000
    Entry TI Elim intra-entity transfer of inventory current year
    Sales $ 320,000
    COGS $ 320,000
    Entry G Removes CURRENT YEAR unrealized GP
    COGS $ 12,500
    Inventory $ 12,500
    *above journal entries effect income statement.
    *Downstream sales debit investment not RE.
    b.
    Akron Inc and Consolidated Subsidiary
    Income Statement
    For Year Ended December 31, 2021
    Sales $ 1,380,000
    COGS $ (575,000)
    Gross Profit $ 805,000
    Operating Expenses $ (635,000)
    Consolidated Net Income $ 170,000

    Total Sales Total COGS


    Akron Sales $ 1,100,000 Akron COGS $ 500,000
    + Toledo Sales $ 600,000 + Toledo COGS $ 400,000
    = Total sales $ 1,700,000 - unrealized GP 2020 $ (17,500)
    - Intra Entity sales $ (320,000) - intra entity sales $ (320,000)
    = Revenues Total $ 1,380,000 + unrealized GP in 2021 $ 12,500
    = COGS Total $ 575,000
    Operating Expenses Total
    Akron operating expenses $ 400,000
    + Toledo operating exp $ 220,000
    + Amortization expense $ 15,000
    = Total Expenses $ 635,000

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