Multiple Transfers between Affiliates
Klon Corporation owns 70 percent of Brant Company’s stock and 60 percent of Torkel Company’s stock. During 20X8, Klon sold inventory purchased in 20X7 for $100,000 to Brant for $150,000. Brant then sold the inventory at its cost of $150,000 to Torkel. Prior to December 31, 20X8, Torkel sold $90,000 of inventory to a nonaffiliate for $120,000 and held $60,000 in inventory at December 31, 20X8.
Required
a. Give the journal entries recorded by Klon, Brant, and Torkel during 20X8 relating to the intercorporate sale and resale of inventory.
b. What amount should be reported in the 20X8 consolidated income statement as cost of goods sold?
c. What amount should be reported in the December 31, 20X8, consolidated balance sheet as inventory?
d. Give the eliminating entry needed at December 31, 20X8, to remove the effects of the inventory transfers.
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