ASAP - PLEASE ANSWER THE QUESTIONS IN EXCEL AND WITH DETAILED EXPLANATIONS

Problem 1 :

Suppose Big Company owns 30% of Small Company and sells $100,000 of inventory to Small. Markup, or gross profit (expressed as a percentage of the transfer price), is 25%. Small Company sells 60% of the inventory by year-end.

What amount of unrealized profit should Big Company defer?

Answer :

The journal entry to record the deferral of the unrealized profit is:

Answer:

Problem 2:

Large Company acquires 30% of Small Company for $600,000 on 1/1/2020 and opts to apply the fair-value method. The book value of Small Company on 1/1/2020 was $1,500,000, and Small Company has a patent on its balance that is undervalued by $300,000.

Net income, dividends, and fair values of Large Companys share of Small Companys stock for 2020 through 2021 are as follows:

Fair Value of Small Co.

Net Income Dividends (at year-end)

2020 $200,000 $100,000 $2,200,000

2021 $300,000 $120,000 $2,300,000

2022 $350,000 $150,000 $2,200,000

The journal entries to record these events are as follows:

Answer :