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INTERCOMPANY INVENTORY TRANSFERS. Inventory Transfers: A Point to Remember. Intercompany Sales and Intercompany Cost of Sales accounts are eliminated only in years in which intercompany sales occur. Inventory Transfers: The Three Procedural Methods.

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Presentation Transcript
inventory transfers a point to remember
Inventory Transfers: A Point to Remember
  • Intercompany Sales and Intercompany Cost of Sales accounts are eliminated only in years in which intercompany sales occur.
inventory transfers the three procedural methods
Inventory Transfers: The Three Procedural Methods
  • MODULE 1: The Complete Equity Method:
    • Unrealized profit is deferred in the selling entity’s general ledger.
  • MODULE 2: The Partial Equity Method:
    • Unrealized profit is deferred in the consolidation process.
  • MODULE 3: The Cost Method:
    • Unrealized profit is deferred in the consolidation process.
miscellaneous lower of cost or market adjustments
Miscellaneous:Lower-of-Cost-or-Market Adjustments
  • For consolidated reporting purposes, the appropriate valuation of intercompany- acquired inventory is:
    • The lower of:
      • (1) the selling entity’s cost or (2) the market value.
miscellaneous partial ownerships reporting to the nci shareholders
Miscellaneous: Partial Ownerships--Reporting to the NCI Shareholders
  • Under existing GAAP, a partially owned subsidiary:
    • Need not defer any of its unrealized intercompany gross profit in reporting to its NCI shareholders.
review question 1
Review Question #1
  • For 2001, Paxco reported $60,000 of intercompany sales (25% markup on cost and fully paid for by Y/E) to Saxco, which reported $20,000 of intercompany acquired inventory at 12/31/01. The unrealized profit at 12/31/01 is:A. $ -0- B. $4,000 C. $5,000 D. $20,000 E. None of the above.
review question 1 with answer
Review Question #1--With Answer
  • For 2001, Paxco reported $60,000 of intercompany sales (25% markup on cost and fully paid for by Y/E) to Saxco, which reported $20,000 of intercompany acquired inventory at 12/31/01. The unrealized profit at 12/31/01 is:A. $ -0- B. $4,000 (20% of $20,000 Y/E inventory) C. $5,000 D. $20,000 E. None of the above.
review question 2
Review Question #2
  • For 2001, Punco reported intercompany cost of sales of $1,600,000 (markup is 20% of transfer price) to Sunco, which reported $600,000 of intercompany acquired inventory at 12/31/01. The unrealized profit at 12/31/01 is:A. $80,000 B. $96,000 C. $120,000 D. $150,000 E. None of the above.
review question 2 with answer
Review Question #2--With Answer
  • For 2001, Punco reported intercompany cost of sales of $1,600,000 (markup is 20% of transfer price) to Sunco, which reported $600,000 of intercompany acquired inventory at 12/31/01. The unrealized profit at 12/31/01 is:A. $80,000 B. $96,000 C. $120,000 (20% of $600,000 Y/E inventory)D. $150,000 E. None of the above.
review question 3
Review Question #3
  • For 2001, Salco (80% owned by Palco) reported $800,000 of intercompany sales (1/3 markup on cost) to Palco, which resold $700,000 of this inventory by 12/31/01. The unrealized profit at 12/31/01 is:A. $20,000 B. $25,000 C. $26,667 D. $33,333 E. None of the above.
review question 3 with answer
Review Question #3--With Answer
  • For 2001, Salco (80% owned by Palco) reported $800,000 of intercompany sales (1/3 markup on cost) to Palco, which resold $700,000 of this inventory by 12/31/01. The unrealized profit at 12/31/01 is:A. $20,000 B. $25,000 (25% x $100,000 inventory on hand) C. $26,667 D. $33,333 E. None of the above.
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