Using the equity method solve the following: Below are the income statement info

Question

Using the equity method solve the following: Below are the income statement information for 2014 of Nike Inc and its 70% owned subsidiary "ABC". Nike ABC Sales 5,400,000 2,100,000 Cost of goods sold 2,400,000 1,500,000 Gross profit 3,000,000 600,000 Operating expense 1,500,000 300,000 Net income 1,500,000 300,000 • Intercompany sales for 2014 are downstream and total $600,000. • ABC inventory contain unrealized profit beginning of $30,000 • ABC inventories contain unrealized profit- ending of $60,000 Required • Compute non-controlling interest share of profit for 2014 [Marks 4] • Compute the parent net income [Marks 4] • Record the elimination entries and the consolidated income statement for 2014. [Marks 20]

Explanation / Answer

Particulars Nike Inc $ ABC$ Total $ Sales    54,00,000.00    21,00,000.00    75,00,000.00 Cost of sales -24,00,000.00 -15,00,000.00 -39,00,000.00 Gross Profit    30,00,000.00       6,00,000.00    36,00,000.00 Operating expenses -15,00,000.00     -3,00,000.00 -18,00,000.00 Net Income    15,00,000.00       3,00,000.00    18,00,000.00 Adjust: Down stream transactions Add:Opening stock adjustment          21,000.00 Less"Clsoing stock adjustment         -42,000.00 Less:Minority i.e non-controlling share holder         -90,000.00 Consolidated net income    16,89,000.00 Net income of the ABC $       3,00,000.00 Non-Controlling interest share          90,000.00 (30% of 300,000) Controlling interest share i.e Nike's-1       2,10,000.00 (To be adjusted) Add:Unrealised profit on opening inventory (30000*70%)-2          21,000.00 Less:Unrealised profit on closing inventory   (60000*70%)-3         -42,000.00 Total Nikes income from ABC for consolidation (1+2-3)       1,89,000.00

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.