Prepare an intercompany profit analysis

Assignment Help Accounting Basics
Reference no: EM133029341

Question - The income statements of the parent company, P, and its subsidiary company, S are given below. P controls S with 80% ownership of its voting shares; P uses consolidated financial statement reporting. All amounts are in Canadian dollars for the year ended December 31, Year 8

 

P

S

Sales

$800,000

$348,000

Gain on capital asset sale

0

32,000

Dividend and interest income

50,000

0

 

850,000

380,000

Cost of goods sold

500,000

200,000

Gross Profit

350,000

180,000

Selling and Administrative Expenses

(110,000)

(70,000)

Amortization Expense

(45,000)

(35,000)

Income Tax Expense

(62,000)

(30,000)

Net Income

$133,000

$45,000

The following information is available to help you prepare consolidated statements:

1) P uses the cost method to account for its investment in S.

2) At the time when P purchased its ownership interest in S, there was no acquisition differential.

3) The gain on sale of capital assets resulted from a sale from S to P on January 1, Year 8. S sold the capital assets to P for $192,000. The net book value of the equipment on S's books at that time was $160,000. The equipment was originally purchased by S on January 1, Year 4. S was amortizing the capital assets using the straight-line method over its estimated useful life of 12 years.

4) On September 28, Year 8, S declared and paid dividends of $50,000.

5) On October 31, Year 8, P sold inventory to S for $120,000. The original cost of the inventory when purchased by P was $80,000. At December 31, Year 8, 40% of the inventory remained in S's inventory.

6) Both P and S pay income tax at a rate of 30%.

Required -

a) Prepare an intercompany profit analysis schedule to show all intercompany profits before and after tax, as well as the tax effects for year 8.

b) Calculate consolidated net income for year 8 along with income attribution to each of P shareholders and NCI shareholders.

c) Calculate the consolidated balances that would appear on the consolidated income statement prepared by P for the year ended December 31, year 8 (show your calculations):

(i) Sales

(ii) Cost of Goods Sold

(iii) Income Tax Expense

Reference no: EM133029341

Questions Cloud

Calculate the Haslam profit margin : Assume you are given the following relationships for the Haslam Corporation: Sales/total assets 1.8. Calculate the Haslam profit margin
Describe the role of training and development : Question:892-Describe the role of training and development in the performance management process.
What is the ethical question : Ethical Scenario: You work as the quality director in a small rural hospital. A new physician joins the staff. Within three months you discover several cases
Evaluate the survey feedback intervention : What methods are used for collecting diagnostic data, primary techniques used to analyze diagnostic data, process issues associated with data feedback?
Prepare an intercompany profit analysis : Prepare an intercompany profit analysis schedule to show all intercompany profits before and after tax, as well as the tax effects for year 8
What is good faith bargaining : The value of negotiation in labor-management relations is such that both parties bargain in good faith and are able to come to an agreement on all mandatory col
Basic understanding of the production side : 1. Where should OHS "Managers" report in an organization to be most effective, should it be a hybrid role with function and staff function or with staff positio
What is the alleged ground of discrimination : Joe applied for a position in a daycare center. The center refused to interview him because it thinks that parents would be uncomfortable with having a man take
Explain the relationship between trust and ethics : 1. Using examples, explain how law and ethics relate/ differ from each other.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd