A parent and its subsidiary began engaging in intercompany merchandise sales this year. Total retail value of upstream sales for the year were $65,000; the retail value of downstream sales was $25,000. The subsidiary sells to the parent at a markup of 35% on cost; the parent sells to the subsidiary at a markup of 30% on sales price. Upstream sales of $13,500 remain in the parent's ending inventory. Downstream sales of $6,000 remain in the subsidiary's ending inventory.
Required
a. Calculate the unconfirmed profit in the parent's ending inventory and in the subsidiary's ending inventory.
b. Prepare the working paper eliminating entries (I) for the intercompany inventory transactions, required to consolidate the trial balances of the parent and its subsidiary for the year.

Question

Quizplus · Accepted Answer

The Answer of A parent and its subsidiary began engaging in intercompany merchandise sales this year. Total retail value of upstream sales for the year were $65,000; the retail value of downstream sales was $25,000. The subsidiary sells to the parent at a markup of 35% on cost; the parent sells to the subsidiary at a markup of 30% on sales price. Upstream sales of $13,500 remain in the parent's ending inventory. Downstream sales of $6,000 remain in the subsidiary's ending inventory.
Required
a. Calculate the unconfirmed profit in the parent's ending inventory and in the subsidiary's ending inventory.
b. Prepare the working paper eliminating entries (I) for the intercompany inventory transactions, required to consolidate the trial balances of the parent and its subsidiary for the year.

A Parent and Its Subsidiary Began Engaging in Intercompany Merchandise