Please help. Springdale Corporation holds 75 percent of the voting shares of Hol
ID: 2795793 • Letter: P
Question
Please help.
Springdale Corporation holds 75 percent of the voting shares of Holiday Services Company. Assume Springdale accounts for this investment using the equity method. During 20X7, Springdale sold inventory costing $72,000 to Holiday Services for $108,000, and Holiday Services resold one-third of the inventory in 20X7. Also in 20X7, Holiday Services sold land with a book value of $140,000 to Springdale for $230,000, and Springdale continues to hold the land. The companies file separate tax returns and are subject to a 40 percent tax rate.
Prepare the consolidation entries relating to the intercorporate sale of inventories and land to be entered in the consolidation worksheet prepared at the end of 20X7.
Springdale Corporation holds 75 percent of the voting shares of Holiday Services Company. Assume Springdale accounts for this investment using the equity method. During 20X7, Springdale sold inventory costing $72,000 to Holiday Services for $108,000, and Holiday Services resold one-third of the inventory in 20X7. Also in 20X7, Holiday Services sold land with a book value of $140,000 to Springdale for $230,000, and Springdale continues to hold the land. The companies file separate tax returns and are subject to a 40 percent tax rate.
Explanation / Answer
JOURNAL ENTRIES FOR INTERCOMPANY TANSATIONS 1 INTERCOMPANY ACCOUNT RECEIVABLES A/C DR 108000 TO INTERCOMPANY SALES 108000 INTERCOMPANY COST OF SALES A/C DR 72000 TO INVENTORY 72000 INVENTORY A/C DR 72000 TO INTERCOMPANY ACCOUNT RECEIVABLES 72000 2 INTERCOMPANY ACCOUNT RECEIVABLES A/C DR 230000 TO INTERCOMPANY TRANSACTIONS 230000 INTERCOMPANY TRANSACTIONS A/C DR 230000 TO PROFIT ON INTERCOMPANY TRANSACTIONS 90000 TO SALES 140000