Computing the amount of investment income and preparing [I] consolidation entrie

Question

Computing the amount of investment income and preparing [I] consolidation entries-Cost methood Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2015 and 2016: reparing Inventory End of Year (Payable) Inventory Sales Gross Profit% 34% Income $135,000 15% 345,000 1201s smooo sooooo 30% | Assume that inventory not remaining at the end of the year was sold outside of the consolidated group during the year. The subsidiary paid $675,000 in dividends during 2016 a. How much Income (loss) from subsidiary should the parent report in its pre-consolidation income statement the year ending 2016 assuming that it uses the cost method of accountng for its Equity Investment? 18% S36.000 b. Prepare the requlred [i] consolidation entries for 2016. on Journal Credit Description lcogl To recognize prior year profit on intercompany sales [lsale:) cogl To defer current periad profit on intercompeny seles ercompary Please answer all parts of the question

Explanation / Answer

Note: The image here is very very blurred, however I have taken care but I am skeptical about the figures of sales in 2016. So please check if the figures I have taken are correct or not once thriugh the second table in which formula is written. If not, let me know via comment section what is the correct amount which I have taken wrong and I shall ammend the answer accordingly.

Part B

Part A Particulars Amount Net Income of Subsidiary $9,00,000.00 Add: Deffered profit of 2015 $4,860.00 Less: Deffered Profit of 2016 $(6,885.00) $8,97,975.00 Particulars Amount Net Income of Subsidiary $9,00,000.00 Add: Deffered profit of 2015 90000*0.3*0.18 Less: Deffered Profit of 2016 135000*34%*15% $8,97,975.00

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