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bala
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| Posted: 14 Sep 2010 at 23:33 | IP Logged
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Selected information from the separate and consolidated balance sheets and income statements of Pare, Inc. and its subsidiary, Shel Co., as of December 31, 1994, and for the year then ended is as follows:
Pare Shel Consolidated
Balance sheet accounts
Accounts receivable $52,000 $38,000 $ 78,000
Inventory 60,000 50,000 104,000
Income statement accounts
Revenues $400,000 $280,000 $616,000
Cost of goods sold 300,000 220,000 462,000
Gross profit $100,000 $60,000 $154,000
Additional information:
During 1994, Pare sold goods to Shel at the same markup on cost that Pare uses for all sales.
What was the amount of intercompany sales from Pare to Shel during 1994?
A) 6000
B) 12000
C) 58000
D) 64000
ans is D.
Same facts as above, the qn is now asking for, At December 31, 1994, what was the amount of Shel's payable to Pare for intercompany sales?
ans is $12000.
iam confused with these qns. why is it $12000 instead of $64000 in the second qn?
please help.
Thanks!
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Persia
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| Posted: 15 Sep 2010 at 00:55 | IP Logged
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Accts rec - Pare $52,000
Accts rec - Shel 38,000
90,000
Accts rec consol (78,000)
Interco rec/pay eliminated $ 12,000
Always eliminate 100% of receivable/payable
Assume, the question provide information for A/C payable for Pare & Shel instead of A/C receivable and asks for amount of Shel's receiavble to Pare for intercompany sales?
Accts Pay - Pare $52,000
Accts Pay - Shel 38,000
90,000
Accts Pay consol (78,000)
Interco pay/rec eliminated $ 12,000
I hope you got it.
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Aesop
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| Posted: 15 Sep 2010 at 01:04 | IP Logged
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In the first question the consolidated revenues were 64k less than the two statements added together so 64k was eliminated because of intercompany sales.
The second question is answered by comparing the accounts receivable. The total AR is 90k but the consolidated statement only shows 78k, a 12k difference. Remember a receivable for one company is a payable for the other.
I almost forgot how tough this stuff was.
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bala
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| Posted: 15 Sep 2010 at 02:04 | IP Logged
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Thanks so much Persia & Aesop. that was very helpful!
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Daisycpa
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| Posted: 15 Sep 2010 at 12:17 | IP Logged
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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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Topic: Inter co Transactions
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