ON 1/1/2000 SANDERS COMPANY PURCHASED ALL OF THE STOCK OF CLINTON COMPANY AT BOO

Question

ON 1/1/2000 SANDERS COMPANY PURCHASED ALL OF THE STOCK OF CLINTON COMPANY AT BOOK VALUE. ON 12/1/2014 SANDERS SOLD MERCHANDISE TO CLINTON. THIS MERCHANDISE WAS SOLD ON CREDIT FOR $400,000 AND HAD COST SANDERS $160,000. AT THE END OF 2014 NONE OF THIS INVENTORY HAD BEEN SOLD AND THE OBLIGATION HAD NOT BEEN PAID.

IN 2015 CLINTON SOLD ¾ OF THIS MERCHANDISE FOR $325,000 AND PAID OFF THE ACCOUNT PAYABLE

IN 2016 CLINTON SOLD THE REMAINDER OF THIS MERCHANDISE FOR $108,000.

THE INCOME STATEMENTS FOR 2014, 2015 AND 2016 ARE AS FOLLOWS:

                                      2014

                                      SANDERS                      CLINTON

SALES                      $5,000,000                         $1,000,000

COGS                      $3,000,000                         $400,000

G/P                            $2,000,000                        $600,000

INVEST INC.              600,000                                  0

INCOME                $2,000,000                           $600,000

[note: SANDERS uses partial equity for investment in CLINTON]

                                                2015

                                      SANDERS                      CLINTON

SALES                      $5,000,000                         $1,000,000

COGS                      $3,000,000                         $400,000

G/P                            $2,000,000                        $600,000

INVEST INC.              600,000                                  0

INCOME                $2,000,000                           $600,000

[note: SANDERS uses partial equity for investment in CLINTON]

                                              2016

                             SANDERS                                CLINTON

SALES                      $5,000,000                         $1,000,000

COGS                      $3,000,000                         $400,000

G/P                            $2,000,000                        $600,000

INVEST INC.              600,000                                  0

INCOME                $2,000,000                           $600,000

[note: SANDERS uses partial equity for investment in CLINTON]

REQUIRED:

Make the entry SANDERS makes when it sells the merchandise to CLINTON in 2014

Make the entry CLINTON makes when it buys the merchandise

Make the necessary worksheet entries needed in 2014 connected with the inventory transaction

Prepare a 2014 consolidated income statement

Prepare the entry CLINTON makes when it pays SANDERS in 2015

Make the entry CLINTON makes when it sells the merchandise acquired from SANDERS in 2015

Make the necessary worksheet entries needed in 2015 connected with inventory

Prepare a 2015 consolidated income statement

Make the necessary worksheet entries needed in 2016 connected with inventory

Prepare a 2016 consolidated income statement

Explanation / Answer

ON 1/1/2000 SANDERS COMPANY PURCHASED ALL OF THE STOCK OF CLINTON COMPANY AT BOO

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