the following information applies to questions 21 25 on january 1 2013 sheldon inc a 4314398

the following information applies to questions 21 25 on january 1 2013 sheldon inc a 4314398

The following information applies to Questions 21 – 25.

On January 1, 2013, Sheldon, Inc. acquired the outstanding voting common stock of SteffenCorp. for $472,500. Of this payment, $35,000 was allocated to undervalued equipment (with a five-year life).  Any remaining excess was attributable to goodwill.

During 2013, Sheldon bought inventory for $70,000 and sold it to Steffenfor $87,500.  40% of these goods were still in the company's possession on December 31.The financial statements of the two companies as of December 31, 2013are presented below.

Sheldon

Steffen

Sales revenue

  $    525,000

        $175,000

Cost of goods sold

     (245,000)

(70,000)

Gross profit

        280,000

105,000

Operating expenses

                    (35,000)

(8,750)

Equity income

    171,500

_______

Net Income

$   416,500

$96,250

Retained Earnings, 1/1/13

   $   525,000

          $131,250

Net income

        416,500

96,250

Dividends

     -0-

-0-

Retained Earnings, 12/31/13

$  941,500

$227,500

Cash and receivables

  $   350,000

$78,750

Inventory

       262,500

96,250

Equity investment

644,000

Property, plant &equipment (Net) 

770,000

262,500

Total Assets

$2,026,500

$437,500

Accounts payable

    $  435,000

   $73,500

Accrued liabilities

        300,000

49,000

Common stock

          70,000

17,500

Additional paid-in capital

        280,000

70,000

Retained Earnings, 12/31/13

     941,500

227,500

Total Liabilities and Equities

$2,026,500

$437,500

Topic: Intercompany Inventory Sales

LO: 1

21.  What is consolidated revenues?

a. $787,500

b.$612,500

c. $525,000

d$175,000

Topic: Undervalued Depreciable Assets

LO: 3

22.  What is consolidated operating expenses?

a. $50,750

b. $43,750

c.$42,000

d. $45,000

Topic: Intercompany Inventory Sales

LO: 1

23.  What is consolidated cost of goods sold?

a.$315,000

b. $210,000

c.$322,000

d. $234,500

 

Topic: Undervalued Depreciable Assets

LO: 3

24.  What is the consolidated book value of property, plant and equipment on the December 31, 2013balance sheet?

a.$1,032,500

b. $1,067,500

c. $1,060,500

d. $1,005,000

Topic: Intercompany Inventory Sales

LO: 1

25.  What is consolidated inventory on the December 31, 2013balance sheet?

a.$358,750

b.$351,750

c.$365,750

d.$262,500

The following information applies to Questions 26-30.

Akers Company, a 100% owned subsidiary of MuhsCorporation, sells inventory to Muhsat a 30% profit on selling price. The following data are available pertaining to inter-company purchases by Muhs:

Inter-company sales:Unsold at year end based on selling price:

2014:              $9,600              2014:$   1,440

2015:              $14,400              2015:$4,800

2016:              $18,000              2016:$3,600

Akers’profit numbers were $84,000, $102,000 and $112,800 for 2014, 2015, and 2016, respectively.Muhsreceived dividends from Akers of $12,000 for 2014 and 2015, and $18,000 for 2016.

Topic: Intercompany Inventory Sales

LO: 1

26. What is the balance in Equity Income for 2014?

a. $84,000

b. $82,560

c. $83,568

d.$74,400

Topic: Intercompany Inventory Sales

LO: 1

27.  What is the balance in Equity Income for 2015?

a.$100,992

b.$102,000

c.$102,432

d. $100,560

Topic: Intercompany Inventory Sales

LO: 1

28. What is the balance in Equity Income for 2016?

a.$102,000

b. $114,240

c. $112,800

d. $113,160

 

 

Topic: Intercompany Inventory Sales

LO: 1

29.  What would be the net debit or credit to cost of goods sold on the 2015consolidation worksheet?

a.$14,400 credit

b. $13,392 credit

c.$12,960 credit

d.$1,440debit

Topic: Intercompany Inventory Sales

LO: 1

30.What would be the debit to retained earnings regarding the 2014consolidation entry related to the unrealized inventory profit?

a.$-0-

b. $2,880

c. $1,440

d. $432

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