1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
gulaghasi [49]
3 years ago
8

Cruella Inc. owns 85% of Horace Co. During 20X9, Cruella sells goods to Horace with a 25% gross profit. Horace sold all of these

goods to a 3rd party in 20X9. For the 20X9 consolidated financial statements. How should the summation of the Cruella and Horace income statement items be adjusted?
a. No adjustment is needed.
b. Sales and COGS should be reduced by 80% of the intercompany sales amount.
c. Net income should be reduced by 80% of the gross profit on intercompany sales amount.
d. All intercompany sales and costs of goods sold must be eliminated in consolidation
Business
2 answers:
vovangra [49]3 years ago
4 0

Answer:

Option A is the correct answer,no adjustment is needed.

Explanation:

When related companies sell to each other,the sales transaction is not sales in actual sense,as it is likened to the left hand of an individual exchanging cash with the right hand,in other words, the cash is still owned by the same person.

The same concept is applicable to subsidiaries and parent,the sales recorded from a group perspective is when they sold to external third parties.

When sales happen between related companies, a provision for unrealized profits has to be made to the tune of inventory purchased from related companies  not yet sold externally,as the whole of the goods have been to third parties, no such provision or adjustment is required.

just olya [345]3 years ago
3 0

Answer:

d. All intercompany sales and costs of goods sold must be eliminated in consolidation.

Explanation:

For a group of companies, the figure to be used in the profit and loss account must only be sales to and purchases from customers or companies that are not part of the group. For this reason, intra group sales are to be eliminated from sales and cost of sales figures used in the profit and loss account.

In addition, unrealized profit on goods should also be eliminated in case there are some of the goods related intra good sales that are not yet sold.

Therefore, the correction is d. All intercompany sales and costs of goods sold must be eliminated in consolidation.

You might be interested in
Wie Corp's sales last year were $315,000, and its year-end total assets were $355,000. The average firm in the industry has a to
irakobra [83]

Answer:

Assets must decrease by 223,750

Explanation:

the total assets turnover is calcualte as follows:

\frac{sales}{assets}

As the new CFO jsut want to reduce assets and not to put the effort to increase sales as it see it less likely It will reduce assets (lower the credit term, lower inventory stocks among other measurements)

our goal is a value of 2.4 with sales of 315,000

\frac{315,000}{Assets}  = 2.4\\Assets = 315,000 \div 2.4\\

Assets = 131.250‬

currently the assets are 355,000

we need to redue it to 131,250 so we need a decrease in the order of:

355,000 - 131,250 = 223,750

7 0
3 years ago
Mr. and Mrs. Anderson own three shares of Magic Tricks Corporation's common stock. The market value of the stock is $60. The And
postnew [5]

Answer:

$2

Explanation:

According to the given situation, the computation of the value of a right is shown below:-

Value of a right = (Market value of right + Subscription right) ÷ Number of rights 1

= ($60 - $48) ÷ (5 + 1)

= $12 ÷ 6

= $2

Therefore for computing the value of a right we simply applied the above formula and the same is to be considered

4 0
3 years ago
A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The
Ksivusya [100]

Answer:

$45,297

Explanation:

Data provided as per the question

Installment = $9,000

Present value factor = 5.0330

The calculation of present value is shown below:-

Present value = Installment × Present value factor

= $9,000 × 5.0330

= $45,297

Therefore for computing the present value of the loan we simply multiply the installment with present value factor.

5 0
3 years ago
What does exceptional customer service mean to you?
Orlov [11]
Think customer first
3 0
3 years ago
) In April of 2019, Mike acquired a machine for $30,000 to use in his business. It is the only plant asset he purchased this yea
yan [13]

Answer:

Option $6,000

Explanation:

Data provided in the question:

Cost of the machine acquired = $30,000

Classified useful life = 5 years property

Now,

The MARCS rate for 5 years property, the depreciation rate is 20%

Therefore,

The depreciation for the year 2019 will  be

= 20% of the Cost of the machine acquired

= 0.20 × $30,000

= $6,000

Hence,

Option $6,000

7 0
3 years ago
Other questions:
  • With Kanban, project management becomes a game of facilitating and implementing better risk management.
    14·1 answer
  • Scenario: Over the last several months, there has been a rapid increase in the number of loans that banks have provided for mort
    14·2 answers
  • Which of the following is a feature of an effective business email?
    7·1 answer
  • The Eco Pulse survey from the marketing communications firm Shelton Group asked individuals to indicate things they do that make
    6·1 answer
  • In 1914, the United States prohibited the importation of Mexican avocados even though Mexico is the world’s largest producer of
    9·1 answer
  • The following selected transactions were completed by Silverado Delivery Service during February:1. Received cash from owner as
    9·1 answer
  • A firm wants to strengthen its financial position. Which of the following actions would INCREASE its quick ratio?a) Offer price
    5·1 answer
  • Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar,
    12·1 answer
  • Fran, a spokesperson for her company, gives a speech harshly criticizing the mayor and his business policies. Fran's boss, howev
    14·1 answer
  • Carrie billed her legal clients $6,000 for legal work completed during the month. This
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!