Sweeny Corporation owns 60 percent of Bitner Company\'s shares. Partial 20X2 fin

Question

Sweeny Corporation owns 60 percent of Bitner Company's shares. Partial 20X2 financial data for the companies and consolidated entity were as follows:

On January 1, 20X2, Sweeny's inventory contained items purchased from Bitner for $75,000. The cost of the units to Bitner was $50,000. All intercorporate sales during 20X2 were made by Bitner to Sweeny.

Required:

a. What amount of intercorporate sales occurred in 20X2?

b.

How much unrealized intercompany profit existed on January 1, 20X2? On December 31, 20X2?

c.

Prepare the worksheet consolidation entries relating to inventory and cost of goods sold needed to prepare consolidated financial statements for 20X2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the entry to eliminate the beginning inventory profit.

*Record the entry to eliminate the intercompany inventory sale.

d.

If Bitner reports net income of $90,000 for 20X2, what amount of income is assigned to the noncontrolling interest in the 20X2 consolidated income statement?

Sweeny Corporation Bitner Company   Sales $ 550,000 $ 450,000   Cost of Goods Sold 310,000 300,000   Inventory, Dec. 31 180,000 210,000

Explanation / Answer

a) Amount of intercorporate sales :-

= Total Sales - Sweeny's Sales

= ($550000 + $450000) - ($550000 + ($450000*60%))

= $1000000 - ($550000 + $270000)

= $1000000 - $820000

= $180000

b) Unrealized Intercompany profit existed on January 1, and December 31.

January 1 = $75000 - $50000 = $25000

December 31 = $180000 + $210000 = $15000

c) Journal Entries :-

d)

S.No. Particulars Debit($) Credit($) 1) Retained Earnings A/c Dr. 15000 Non-Controlling Interest A/c Dr. 10000 To Cost of Goods Sold A/c 25000 (To Record profit on Beginning inventory) 2) Sales A/c Dr. 180000 To Cost of Goods Sold A/c 165000 To Inventory A/c 15000 (To Record Intercompany sale of inventory)

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