Multiple Inventory Transfers between Parent and Subsidiary
Proud Company and Slinky Company both produce and purchase equipment for resale each period and frequently sell to each other. Since Proud Company holds 60 percent ownership of Slinky Company, Proud’s controller compiled the following information with regard to intercompany transactions between the two companies in 20X5 and 20X6:
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| Percent Resold |
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| |
|
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| to Nonaffiliate in | Cost to | Sale Price | |
Year | Produced by | Sold to | 20X5 | 20X6 | Produce | to Affiliate |
20X5 | Proud Company | Slinky Company | 60% | 40% | $100,000 | $150,000 |
20X5 | Slinky Company | Proud Company | 30 | 50 | 70,000 | 100,000 |
20X6 | Proud Company | Slinky Company |
| 90 | 40,000 | 60,000 |
20X6 | Slinky Company | Proud Company |
| 25 | 200,000 | 240,000 |
Required
a. Give the eliminating entries required at December 31, 20X6, to eliminate the effects of the inventory transfers in preparing a full set of consolidated financial statements.
b. Compute the amount of cost of goods sold to be reported in the consolidated income statement for 20X6.
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