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ParCorp owns 90 percent of ChiCorp. ParCorp purchased inventory from ChiCorp for $90 on August 20,...

ParCorp owns 90 percent of ChiCorp. ParCorp purchased inventory from ChiCorp for $90 on August 20, 20X8, and resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100. ChiCorp produced the inventory sold to ParCorp for $67. Provide the elimination entry for Dec 31, 20X8 consolidation.

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Answer #1

Journal Entries for recording sale by ParCorp.(Dec 1,2018)

Particulars Debit Credit

Cash $100

Sales $100

(Being entry made to sale of inventory to non affiliated)

COGS($90*70%) $63

Inventory($90*70%) $63

(Being cost of goods/inventory sold to non affiliated is recorded)

ELIMINATION ENTRY:

Particulars Debit Credit

Sales $63

COGS $63

(Being inter co. Sale eliminated)

Note:This entry will not affect consolidated net income.

Note:No elimination of inter co. Profit is required because inter co. Profit has been realized through resale of External party during the current period.

PLEASE UPVOTE IF YOU FIND THE SOLUTION HELPFUL.

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