Distinguish between an upstream sale of inventory and a downstream sale.
February 13, 2020 Comments Off on Distinguish between an upstream sale of inventory and a downstream sale. Statistics Assignment help
  1. Distinguish      between an upstream sale of inventory and a downstream sale. Why is it      important to know whether a sale is upstream or downstream?
  2. How do      unrealized intercompany inventory profits from a prior period affect the      computation of consolidated net income when the inventory is resold in the      current period? Is it important to know whether the sale was upstream or      downstream? Why or why not?
  3. How      will the elimination of unrealized intercompany inventory profits recorded      on the subsidiary’s books affect consolidated retained earnings?
  4. A      parent company may use on its books one of several methods of accounting      for its ownership of a subsidiary: (a) cost method, (b) modified cost      method, or (c) fully adjusted equity method. How will the choice of method      affect the reported balance in the investment account when there are      unrealized intercompany profits on the parent’s books at the end of the      period?
  5. If a      company sells a depreciable asset to its subsidiary at a profit on      December 31, 20X3, what account balances must be eliminated or adjusted in      preparing the consolidated income statement for 20X3? If the sale instead      occurred on January 1, 20X3, what additional account(s) will require      adjustment in preparing the consolidated income statement?
  6. How      are unrealized profits treated in the consolidated income statement if the      intercompany sale occurred in a prior period and the transferred item is      sold to a nonaffiliate in the current period?
  7. When a      parent company sells land to a subsidiary at more than book value, the      consolidation entries at the end of the period include a debit to the gain      on the sale of land. When a parent purchases the bonds of a subsidiary      from a nonaffiliate at less than book value, the consolidation entries at      the end of the period contain a credit to a gain on bond retirement. Why      are these two situations not handled in the same manner on the      consolidation worksheet?
  8. When a      parent company purchases a subsidiary’s bonds from a nonaffiliate for more      than book value, what income statement accounts will be affected in      preparing the consolidated financial statements? What will be the effect      on income assigned to the controlling interest in the consolidated income      statement?
  9. How      would the relationship between interest income recorded by a subsidiary      and interest expense recorded by the parent be expected to change when      comparing a direct placement of the parent’s bonds with the subsidiary to a      constructive retirement in which the subsidiary purchases the bonds of the      parent from a nonaffiliate?
  10. A      subsidiary purchased bonds of its parent company from a nonaffiliate in      the preceding period and a gain on bond retirement was reported in the      consolidated income statement as a result of the purchase. What effect      will that event have on the amount of consolidated net income and income      to the noncontrolling interest reported in the current period?