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Aesop
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| Posted: 15 Sep 2010 at 14:15 | IP Logged
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Daisycpa wrote:
| Can someone explain the answer to question 1? I understand how you get the answer, but I don't understand why. |
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Because in consolidated statements intercompany sales are not recognized until the goods are sold to a 3rd party. So sales are intercompany sales are eliminated. It should be noted that the COGS of the Parent will always be the basis of recognizing profits for consolidated statements.
Its really pretty neat stuff.
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Interpol CPA
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| Posted: 16 Sep 2010 at 05:07 | IP Logged
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Basically, if there were no intercompany sales then the total
consolidated revenues would simply be revenues from company 1
plus revenues from company 2. Since we see that consolidated
revenues are less than that total, we know that sales between the
companies must have been eliminated in the consolidation.
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Virtuosobg
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| Posted: 29 Jan 2011 at 16:47 | IP Logged
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For the same question, I have a question regarding the calculation of the amount of unrealized intercompany profit that was eliminated.
The answer is $6,000.
The Becker solution is:
Inventory - Pare $60,000
Inventory - Shel $50,000
= ; ; $110,000
Deduct Inventory Cosolidated $104,000
= $6000.00
I got to that answer differently. For my answer I added the gross profit of both companies to get $160,000 and then deducted the Consolidated gross profit.
Did i get the write answer by chance? Or was my method theoretically correct?
THANKS!
BRad
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