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1: INTERCOMPANY
INVENTORY PROFITS
Sales 1,429
Cost of sales 1,429
Eliminate intercompany sales = $1,000 / (1-30%) = $1,429
Sales 1,500
Cost of sales 1,500
Eliminate intercompany sales = $900 / (1-40%) = $1,500
Cost of sales 80
Inventory 80
Defer profit in ending inventory = $200 x 40%
2: UPSTREAM &
DOWNSTREAM
INVENTORY SALES
Downstream
Sales
3: UNREALIZED PROFITS
IN ENDING INVENTORIES
Inventories XXX
Sales 15,000
Cost of goods sold 15,000
4: RECOGNIZING PROFITS
FROM BEGINNING
INVENTORIES
Unrealized profits in
ending inventory one year
Become
5: IMPACT ON
NONCONTROLLING
INTEREST
Downstream sales:
Income from sub
= CI%(Sub's NI) – Profits in EI + Profits in BI
Noncontrolling interest share
= NCI%(Sub's NI)
Upstream sales:
Income from sub
= CI%(Sub's NI – Profits in EI + Profits in BI)
Noncontrolling interest share
= NCI%(Sub's NI – Profits in EI + Profits in BI)
$84
Sales 700
Cost of sales 700
Cost of Sales 40
Inventory 40
Cost of sales 50
Inventory 50
Depreciation expense 5
Building 5
$90
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Perry's 2012 Equity Entries
Cash 210
Investment in Salt 210
For dividends received
Investment in Salt 532
Income from Salt 532
For share of income
Depreciation expense 5
Building 5