Acc407 Advanced Accounting: Week 4 (E6-8 Karlow Corp, E7-8 Frazer Corp and E7-9 Frazer Corp)

Acc407 Advanced Accounting
Week 4 Assignments

E6-8 Inventory Transfer between Parent and SubsidiaryKarlow Corporation owns 60 percent of Draw Company’s voting shares. During 20X3, Karlow produced 25,000 computer desks at a cost of $82 each sold 10,000 desks to Draw for $94 each. Draw sold 7,000 of the desks to unaffiliated companies for $130 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $140 each. Both companies use perpetual inventory systems.

Required
a. What amounts of cost of goods sold did Karlow and Draw record in 20X3?
b. What amount of cost of goods sold must be reported in the consolidated income statement for 20X3?
c. Give the worksheet eliminating entry or entries needed in preparing consolidated financial statements at December 31, 20X3, relating to the inter corporate sale of inventory.
d. Give the worksheets eliminating entry or entries needed in preparing consolidated financial statements at December 31, 20X4, relating to the inter corporate sale of inventory.
e. Give the worksheet eliminating entry or entries need in preparing consolidated financial statements at December 31, 20X4, relating to the inter corporate sale of inventory if Draw had produce the computer desks at a cost of $82 each sold 10,000 desks to Karlow for $94 each in 20X3, with Karlow selling 7,000 desks to unaffiliated companies in 20X3 and the remaining 3,000 in 20X4.

E7-8 Transfer of Depreciable Asset at Year-End
Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1, 20X1. On December 31, 20X5, Frazer received $210,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $300,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight line basis.

Required
a. Give the worksheet eliminating entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale.
b. Give the worksheet eliminating entry or entries needed at December 31, 20X6, to remove the effects of the intercompany sale.

E7-9 Transfer of Depreciable Asset at Beginning of Year
Frazer Corporation purchased 60 percent of Minnow Corporation’s voting common stock on January 1. 20X1. On January 1, 20X5, Frazer received $245,000 from Minnow for a truck Frazer had purchased on January 1, 20X2, for $300,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight line basis.

Required
a. Give the worksheet eliminating entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale.
b. Give the worksheet eliminating entry or entries needed at December 31, 20X6, to remove the effects of the intercompany sale.
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