Posted: February 26th, 2023

intercompany transactions

1) The following intercompany transactions occurred during the year: (5 Marks)

a) Parent loaned $ _____ to Subsidiary. To keep things simple, assume that there is no interest revenue or interest expense associated with this loan. 

b) Parent made a sale to Subsidiary for $ ______ cash. The inventory had originally cost Parent $ ____. Subsidiary then sold that same inventory to an outsider for $ _______.

c) Parent made a sale to Subsidiary for $_____ cash. The inventory had originally cost Parent $____. Subsidiary has not yet sold that same inventory to an outsider. 

What consolidation worksheet entries would you make?

Note: Assume you own figures wherever required.

2) Suntop Corporation is an 80% owned subsidiary of PentopCorporation, acquired for $ 240,000 on January 1, 2021.                                                                                                            (6 Marks)

• Investment Cost was equal to book value and fair value.• Suntop’s net income in 2021 was $ 60,000 and Pentop’sincome, excluding its income from Suntop, was 80,000.• Pentop’s income includes a $ 12,000 unrealized gain on land that cost $ 42,000 and was sold to Suntop for $ 54,000.• Assume that Suntop sold the land in 2023 for $ 60,000. • Assume Pentop adjust for this transaction in the equity accounts. 

Required:  

1) What Entries would Pentop make in 2021 and 2023?

2) Prepare the Consolidation Entries at December 31, 2021, December 31, 2022 and December 31, 2023. 

3) Exchange rates change because of a number of economic factors affecting the supply of and demand for a nation’s currency. What are the factors that cause change in exchanges rates of currency of a country? State and Explain any four of these factors.                                           (4 Marks)