Enterprises began business some years ago as a franchiser of fast food restaurants known as The Mighty
Question:
Mighty Chicken Shops' cost of goods sold consisted of beginning inventory of $10,000,000, purchases of $60,000,000, and ending inventory of $13,000,000. The subsidiary makes all of its purchases from the parent; the transfer price includes a 20 percent gross margin on sales for MC Enterprises. The gross margin percentage has been constant for several years. All of Mighty Chicken Shops' franchise fees and interest expense were paid to MC Enterprises and all of the subsidiary's debt is owed to the parent. MC Enterprises provides equipment at cost to all its franchisees, including those owned by Mighty Chicken Shops. The subsidiary currently has such equipment originally costing $20,000,000. On average, the equipment has a ten-year life and is currently half depreciated.
Required
Prepare appropriate consolidation eliminating entries at December 31,2012. There is no need to reverse the equity method income accrual, as the parent did not record it. MC Enterprises paid dividends of $5,000,000 (debited directly to stockholders' equity); Mighty Chicken Shops paid no dividends in 2012.
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III