Question

Dozois Inc. (Dozois) is a 100-percent owned subsidiary of Yarbo Ltd. (Yarbo). During the year ended July 31, 2018, Dozois sold merchandise costing $1,100,000 to Yarbo for $1,500,000. During fiscal 2018, Yarbo sold, on credit, the merchandise it had purchased from Dozois to third parties for $1,600,000. These were the only transactions that Yarbo and Dozois entered into during 2018 (with each other or with third parties) and no other costs were incurred.

Required:
a. Prepare an income statement for Dozois for the year ended July 31, 2018.
b. What amount of accounts receivable would Dozois report on its July 31, 2018 balance sheet?
c. What amount of inventory and accounts payable would Yarbo report on its July 31, 2018 balance sheet?
d. Prepare Yarbo's July 31, 2018 consolidated income statement assuming that intercompany transactions aren't eliminated. How much would be reported for accounts receivable, inventory, and accounts payable on the July 31, 2018 consolidated balance sheet?
e. Prepare Yarbo's July 31, 2018 consolidated income statement assuming that intercompany transactions are eliminated. How much would be reported for accounts receivable, inventory, and accounts payable on the July 31, 2018 consolidated balance sheet?
f. Discuss the differences in the information you prepared in parts (d) and (e). Which information is more useful to stakeholders? Explain.



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  • CreatedFebruary 26, 2015
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