Pinta Company, a forklift manufacturer, owns 80% of the voting stock of Standard
ID: 2408800 • Letter: P
Question
Pinta Company, a forklift manufacturer, owns 80% of the voting stock of Standard Company. On January 1, 2014, Pinta Company sold forklifts to Standard Company for $417,200. The forklifts, which represented inventory to Pinta Company, had a cost to Pinta Company of $330,800. The management of Standard Company estimated that the forklifts had a useful life of nine years from the date of purchase. Standard Company uses the straightline method to depreciate its capital assets.
In 2014, Pinta Company reported $636,000 in net income from its independent operations (including sales to affiliates), and Standard Company reported $256,100 in net income from its operations.
Prepare in general journal form the workpaper entries necessary because of the intercompany sales in:
(1) The consolidated financial statements workpaper for the year ended December 31, 2014.
(2) The consolidated financial statements workpaper for the year ended December 31, 2015.
Pinta Company, a forklift manufacturer, owns 80% of the voting stock of Standard Company. On January 1, 2014, Pinta Company sold forklifts to Standard Company for $417,200. The forklifts, which represented inventory to Pinta Company, had a cost to Pinta Company of $330,800. The management of Standard Company estimated that the forklifts had a useful life of nine years from the date of purchase. Standard Company uses the straightline method to depreciate its capital assets.
In 2014, Pinta Company reported $636,000 in net income from its independent operations (including sales to affiliates), and Standard Company reported $256,100 in net income from its operations.
Prepare in general journal form the workpaper entries necessary because of the intercompany sales in:
(1) The consolidated financial statements workpaper for the year ended December 31, 2014.
(2) The consolidated financial statements workpaper for the year ended December 31, 2015.
Explanation / Answer
Part 1)
The workpaper entries because of the inter-company sales for the year ended December 31, 2014 are prepared as below:
_____
Part 2)
The workpaper entries because of the inter-company sales for the year ended December 31, 2015 (prepared under cost or partial equity method and complete equity method) are given as follows:
Cost or Partial Equity Method
_____
Complete Equity Method
Account Titles Debit Credit Sales $417,200 Equipment (417,200 - 330,800) $86,400 Cost of Sales $330,800 Accumulated Depreciation (86,400/9) $9,600 Depreciation Expense $9,600