Assume P owns a controlling interest in S: P\'s sales to S are $23325 in 2017 an

ID: 2343375 • Letter: A

Question

Assume P owns a controlling interest in S:

P's sales to S are $23325 in 2017 and 0 in 2018

P's gross profit margin is 37%

At the end of 2017 the percent of sales from P that remain in S's inventory is 100%

During 2018 S sells all the inventory it purchased from P in 2017 to external parties

The eliminating journal entries during 2017 and 2018 would:

increase(decrease) consolidated 2017 sales by : Answer

increase(decrease) consolidated 2017 COGS by: Answer

increase(decrease) consolidated 2017 inventory by: Answer

increase(decrease) P's investment in S account in 2018 by: Answer

increase(decrease) consolidated 2018 COGS by: Answer

1. Sales will decrease by $23325 as the sale has been made to subsidiary company and that would not be considered for consolidation.

2. COGS will decrease by 23325/1.37 as these goods are still in the stock of the subsidiary and has not been sold. = 17025

3. Stock will decrease by 23328/1.37*0.37 as this stock has not been sold and the margin will be reduced from the stock= 6299

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.