P Inc. owns 70% of Q Inc.
During 2019, P Inc sold inventory to Q for $20,000. Half of this inventory remained in Q's warehouse at December 31, 2019 year end.
On January 1, 2019, Q Inc had inventory in its warehouse which was purchased from P for $5,000. This inventory was sold to an outside party during 2019.
Also during 2019, Q Inc sold inventory to P Inc. for $10,000. 50% of this inventory remained in P's warehouse at year end.
Both companies are subject to a tax rate of 25%. The gross profit percentage on sales is 30% for both companies.
P Inc. uses the cost method to account for its Investment in Q Inc. The inventories of both companies as at December 31, 2019 were all sold to outsiders during 2020. There were no intercompany transactions during 2020.
Prepare a schedule showing the realized and unrealized profits resulting from upstream transactions (i.e. Q Inc. selling to P Inc.) for 2019 and 2020. Your schedule should include both pre-tax and after-tax amounts.

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The Answer of P Inc. owns 70% of Q Inc.
During 2019, P Inc sold inventory to Q for $20,000. Half of this inventory remained in Q's warehouse at December 31, 2019 year end.
On January 1, 2019, Q Inc had inventory in its warehouse which was purchased from P for $5,000. This inventory was sold to an outside party during 2019.
Also during 2019, Q Inc sold inventory to P Inc. for $10,000. 50% of this inventory remained in P's warehouse at year end.
Both companies are subject to a tax rate of 25%. The gross profit percentage on sales is 30% for both companies.
P Inc. uses the cost method to account for its Investment in Q Inc. The inventories of both companies as at December 31, 2019 were all sold to outsiders during 2020. There were no intercompany transactions during 2020.
Prepare a schedule showing the realized and unrealized profits resulting from upstream transactions (i.e. Q Inc. selling to P Inc.) for 2019 and 2020. Your schedule should include both pre-tax and after-tax amounts.

P Inc. Owns 70% of Q Inc