Unrealized Inventory Profits
Morrison Company owns 80 percent of Bloom Corporation’s stock, acquired when Bloom’s fair value as a whole was equal to its book value. The companies frequently engage in intercompany inventory transactions.
Required
Name the conditions that would make it possible for each of the following statements to be true.
Treat each statement independently.
a. Income assigned to the noncontrolling interest in the consolidated income statement for 20X3 is higher than a pro rata share of Bloom’s reported net income.
b. Income assigned to the noncontrolling interest in the consolidated income statement for 20X3 is higher than a pro rata share of Bloom’s reported net income, but consolidated net income is reduced as a result of the elimination of intercompany inventory transfers.
c. Cost of goods sold reported in the income statement of Morrison is higher than consolidated cost of goods sold for 20X3.
d. Consolidated inventory is higher than the amounts reported by the separate companies.
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