On January 1, 2000 Yoda Company purchased all the stock of Vadar Company at book
ID: 2444629 • Letter: O
Question
On January 1, 2000 Yoda Company purchased all the stock of Vadar Company at book value. On October 31st 2015 Yoda sold inventory to Vadar on account. The inventory had cost Yoda $50,000 and it was sold to Vadar for $90,000. At the end of 2015 none of the inventory had been sold by Vadar and Vadar hadn’t paid Yoda for the merchandise.
In 2016, Vadar sold 60% of the merchandise purchased from Yoda to outsiders for $110,000, and Vadar paid Yoda the $90,000.
In 2017 Vadar sold the rest of the merchandise purchased from Yoda to outsiders for $60,000.
Below are the income statements of Yoda and Vadar for 2015, 2016 and 2017. Note Yoda uses initial value method and Vadar has not paid any dividends during the 3 years.
2015 Yoda Vadar
Sales 4,000,000 1,000,000
Cogs 1,900,000 600,000
Gross profit 2,100,000 400,000
Oper. Expenses 1,000,000 200,000
Income 1,100,000 200,000
2016 Yoda Vadar
Sales 4,200,000 1,100,000
COGS 2,100,000 700,000
Gross profit 2,100,000 400,000
Oper expenses 1,000,000 180,000
Income 1,100,000 220,000
2017 Yoda Vadar
Sales 4,500,000 1,200,000
Cogs 2,100,000 500,000
Gross profit 2,400,000 700,000
Oper expenses 1,000,000 400,000
Income 1,400,000 300,000
REQUIRED:
MAKE THE JOURNAL ENTRIES YODA MAKES WHEN IT SELLS THE MERCHANDISE TO VADAR (YODA USES PERPETUAL INVENTORY METHOD)
MAKE THE JOURNAL ENTRY VADAR MAKES WHEN IT BUYS THE MERCHANDISE FROM YODA (VADAR USES PERPETUAL INVENTORY METHOD)
MAKE ANY NECESSARY WORKSHEET ENTRIES IN 2015
PREPARE A 2015 CONSOLIDATED INCOME STATEMENT
MAKE ANY NECESSARY WORKSHEET ENTRIES IN 2016
PREPARE A 2016 CONSOLIDATED INCOME STATEMENT
MAKE ANY NECESSARY WORKSHEET ENTRIES IN 2017
PREPARE A 2017 CONSOLIDATED INCOME STATEMENT
Explanation / Answer
In the books of Yoda 31-Oct-15 Cost of goods sold Dr 50,000 To Inventory account 50,000 (To record cost of goods sold for inventory sold to Vadar) Vadar company Dr 90,000 To Sales account 90,000 (To record sales) 2016 Bank account Dr 90,000 To Sales account 90,000 (To record payment received) In the books of Vadar 31-Oct-15 Inventory account Dr 90,000 To Yoda 90,000 (To record inventory purchased from Yoda) 2016 Cost of goods sold Dr 54,000 To Inventory 54,000 (To record cost of goods sold for inventory sold) 2016 Bank account Dr 110,000 To Sales 110,000 (To record sales) 2017 Cost of goods sold Dr 36,000 To Inventory 36,000 (To record cost of goods sold for inventory sold) 2017 Bank account Dr 60000 To Sales 60000 (To record sales) Consolidated Income statement for the year 2015 Yoda Vadar Total Sales 4,000,000 1,000,000 5,000,000 GOGS 1,900,000 600,000 2,500,000 Gross profit 2,100,000 400,000 2,500,000 Operating expenses 1,000,000 200,000 1,200,000 Income 1,100,000 200,000 1,300,000 Intercompany revenue (40%*50,000*55%) 40,000 Net Consolidated Income 1,260,000 Consolidated Income statement for the year 2016 Yoda Vadar Total Sales 4,200,000 1,100,000 5,300,000 GOGS 2,100,000 700,000 2,800,000 Gross profit 2,100,000 400,000 2,500,000 Operating expenses 1,000,000 180,000 1,180,000 Income 1,100,000 220,000 1,320,000 Intercompany revenue (40%*50,000*50/90) 11,111 Net Consolidated Income 1,308,889 Consolidated Income statement for the year 2017 Yoda Vadar Total Sales 4,500,000 1,200,000 5,700,000 GOGS 2,100,000 500,000 2,600,000 Gross profit 2,400,000 700,000 3,100,000 Operating expenses 1,000,000 400,000 1,400,000 Income 1,400,000 300,000 1,700,000 Intercompany revenue (Nil) - Net Consolidated Income 1,700,000
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