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This is one of my friend's homework for some m/c question but he
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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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