Question: Company P owns 60 of Company S1 and 90 of
Company P owns 60% of Company S1 and 90% of Company S2. S1 sells inventory to S2 at a profit of $ 20,000. All the goods are still in S2’s inventory at year-end. By what amount should consolidated net income be adjusted to eliminate the unrealized profit?
Answer to relevant QuestionsHow does the adjustment differ when there is a sale of an intangible asset; e. g., patent with limited life instead of a capital asset from the subsidiary to the parent? What happens if a company sells a long- lived asset that is part of its inventory to another company in the consolidated group instead of one that is shown as a capital asset on the books of the selling company? Jennifer Lu is a world- renowned architect. She is in the midst of a divorce with her husband, Johnnie Nu. On the whole the separation has been amicable and civil. Jennifer and Johnnie have agreed to divide the value of ...On January 1, 20X1, ABC Limited purchased 90% of the outstanding common shares of XYZ Limited for $ 150,000. At that date, XYZ Limited’s condensed statement of financial position and fair values were as follows:Assume a ...Aztec Corporation purchased 70% of the outstanding shares of Inca Limited on January 1, 20X2, at a cost of $ 80,000. Aztec has always used the cost method to account for its investments. On January 1, 20X2, Inca had common ...
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