On January 1,20X1,Picture Company acquired 70 percent ownership of Seven Corporation at underlying book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Seven Corporation.On April 25,20X1,Seven purchased inventory from Picture for $45,000.Seven sold the entire inventory to an unaffiliated company for $58,000 on October 12,20X1.Picture had produced the inventory sold to Seven for $38,000.The companies had no other transactions during 20X1.
-Based on the information given above,what amount of sales will be reported in the 20X1 consolidated income statement?

Question

Quizplus · Accepted Answer

Since Seven purchased inventory from Picture and later sold it to an unaffiliated company, the internal transaction between Picture and Seven will be eliminated in the consolidation process. Therefore, the sales reported in the 20X1 consolidated income statement will be the external sale made by Seven to the unaffiliated company, which was $58,000.

On January 1,20X1,Picture Company Acquired 70 Percent Ownership of Seven