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This is one of my friend's homework for some m/c question but he just get stuck on the problem, so could you plz help him out to see how to solve it

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X Inc. owns 80% of Y Inc. During 2009, X Inc sold inventory to Y for \$10,000. Half of this inventory

remained in Y?s warehouse at year end. Half of this inventory remained in Y?s warehouse at year

end. Also during 2009, Y Inc sold Inventory to X Inc. for \$5,000. 40% of this inventory remained

in X?s warehouse at year end. Both companies are subject to a tax rate of 50%. The gross profit

percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the

cost method to account for its Investment in Y. Inc.

1. What is the after-tax dollar value of X?s unrealized profits during the year on its sales to

Y?

a) \$2,000. b) \$400. c) \$200. d) \$500. 2. What is the after-tax dollar value of X?s realized profits during the year on its sales to Y?

a) \$2,000. b) \$400. c) \$200. d) \$500. 3. What is the after-tax dollar value of Y?s unrealized profits during the year on its sales to

X?

a) \$200. b) \$300. c) \$400. d) \$500. 4. What is the after-tax dollar value of Y?s realized profits during the year on its sales to X?

a) \$200

b) \$300

c) \$400

d) \$500

5. What effect (if any) would Y?s unrealized profits on its sales to X have on the noncontrolling interest?

a) There would be no effect. b)

There would be an increase to the non-controlling interest account in the

amount of \$30.

c)

There would be a decrease to the non-controlling interest account in the

amount of \$40.

d)

There would be a decrease to the non-controlling interest account in the

amount of \$30.

10. What would be the journal entry to eliminate any unrealized profits from the Consolidated

Financial Statements during the year?

Debit

a) Cost of Goods Sold Credit

\$700 Inventory

b) Sales \$700 \$15,000

Cost of Goods Sold c) Sales \$15,000 \$15,000

Cost of Goods Sold

Inventory d) Cost of Goods Sold

Inventory \$12,000

\$3,000 \$400

\$400 12. Assume that Y Inc. reported an after-tax net income of \$20,000 in 2009, what would be Y?s

adjusted net income for the year?

a) \$20,000. b) \$19,800. c) \$20,200. d) \$19,840.

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This question was answered on: Feb 21, 2020

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