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15 Cards in this Set
- Front
- Back
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When is revenue earned/realized from the viewpoint of the consolidated entity? |
When merchandise is sold outside of the consolidated entity. |
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Eliminating intercompany sales and purchases under the periodic inventory system |
Dr. Sales Cr. Purchases |
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Eliminating intercompany sales and purchases under the perpetual inventory system |
Dr. Sales Cr. COGS |
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Parent-sub purchases & sales; parent's books: recording purchases on account from other entities (perpetual inventory system) |
Dr. Inventory Cr. Accounts payable (at cost) |
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Parent-sub purchases & sales; parent's books: recording intercompany sales to sub (perpetual inventory system)
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Dr. Accounts receivable Cr. Sales |
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Parent-sub purchases & sales; parent's books: recording cost of sales to sub (perpetual inventory system) |
Dr. Cost of sales Cr. Inventory |
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Parent-sub purchases & sales; sub's books: recording intercompany purchases from parent (perpetual inventory system) |
Dr. Inventory Cr. Accounts payable (at purchase price) |
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Parent-sub purchases & sales; sub's books: recording sales to customers outside the consolidated entity |
Dr. Accounts receivable Cr. Sales (at sales price) |
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Parent-sub purchases & sales; sub's books: recording cost of sales to customers |
Dr. Cost of sales Cr. Inventory (at purchase price) |
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What effect does the workpaper elimination have on consolidated net income? |
No effect |
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What is the objective of eliminating the effect of intercompany transactions? |
To show the income and financial position of the consolidated entity as they would have appeared if the intercompany transaction had never taken place |
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Elimination workpaper entries for intercompany sales and cost of sales |
1. Dr. Sales Cr. Cost of Sales 2. Dr. Cost of Sales Cr. Inventory |
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Entry to eliminate intercompany sales and cost of sales |
Dr. Sales Cr. Cost of Sales |
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Entry to eliminate intercompany profit from cost of sales and inventory |
Dr. Cost of Sales Cr. Inventory |
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An overstated ending inventory _____ cost of sales and ______ gross profit. |
Understates, overstates |
