Question

. Your perusal of the General ledger of Hopkins Corp, revealed that during the year 2019,...

. Your perusal of the General ledger of Hopkins Corp, revealed that during the year 2019, Salisbury Corp sold goods to Hopkins Corp for Omani Rials 60000 at a markup of 20%. However, 40% of the goods sold by Salisbury Corp are still unsold by Hopkins Corp at the end of year. REQUIRE: TREATMENT OF INTRA-COMPANY SALES.

Hopkins is parent company and Salisbury is subsidiary company

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Answer #1
Original entries passed in Individual books Debit Credit
Subsidiary Company
Books of Salisbury Corp
Accounts receivable 60000
Sales revenue 60000
Cost of goods sold 50000
Inventory 50000
Parent Company
Hopkins Corp.
Inventory 60000
Accounts payable 60000
Elimination of inter-company sales
Sales revenue(60000*40%) 24000
Cost of good sold(60000*40%/120*100) 20000
Inventory(60000*40%/120*20) 4000
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