P Company owns 70% of the outstanding stock of S Company. During 2019, S Company reported net income of $500,000 and declared $100,000 dividends. Intercompany sales for 2019 totaled $3,000,000, and the gross profit in the intercompany sales is 30% of price (revenue).

During 2020, S company reported net income of $700,000 and declared $200,000 dividends. Intercompany sales for 2019 totaled $4,000,000, and the gross profit in the intercompany sales is 30% of price (revenue).

a. Prepare workpaper entries necessary at the end of the year (both 2019 and 2020) to eliminate the effects of the intercompany sales, assuming that S company sold 100% of the intercompany sales in both years.

b. Prepare workpaper entries necessary at the end of the year (both 2019 and 2020) to eliminate the effects of the intercompany sales, assuming that S company sold 90% of the intercompany sales in 2019 and 80% in 2020.

c. Calculate the amount of the noncontrolling interest (NCI income) to be deducted from consolidated income in arriving at 2019 and 2020 controlling interest in consolidated net income. Assume that S company sold 90% of the intercompany sales in 2019 and 80% in 2020.

Answer rating: 100% (QA)

a 2019 Debit Credit Dr Sales 3000000 Cr PurchasesCOGS 3000000 To eliminate intercompany sales at sel... View the full answer