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Consolidation Entry G credits COGS in the year following transfer because the beginning inventory component of COGS is

overstated by the intra-entity gross profit.

Consolidation Entry G credits COGS in the year following transfer because the beginning inventory component of COGS is Multiple choice question.

overstated by the intra-entity gross profit.

Because consolidation worksheet entries are not posted to any affiliate's individual accounting records, intra-entity ending inventory gross profits from the previous year appear in the subsequent year's beginning inventory of the affiliate who now possesses the inventory. To correct for the presence of intra-entity gross profits in beginning inventory, Consolidation Entry *G

reduces COGS.

If the parent uses the initial value method for its internal investment accounting, in consolidation adjustments are needed to _________.

reflect a full accrual basis in the consolidated financial statements.

Compared to the equity method, when the parent uses the initial value method, which consolidation entries for intra-entity transfers may differ or additionally be included?

The Consolidation Entry (*G) to recognize the intra-entity profit in beginning inventory. The Conversion Entry (*C).

In the consolidated income statement, the net income attributable to the noncontrolling interest is affected by

intra-entity gross profits from upstream inventory transfers. excess acquisition-date fair value amortizations.

Consistent with the textbook treatment of intra-entity inventory profits, all income effects of intra-entity depreciable asset profits are assigned to the original of the asset.

seller

In preparing consolidated financial statements, the gross profit or loss recorded by individual affiliates for intra-entity asset transfers is

excluded from net income. excluded from inventory in the consolidated balance sheet.

The accounting effects of inventory sales across companies within a consolidated entity are removed when preparing consolidated financial statements because

from a consolidated perspective, neither a sale nor a purchase has occurred. intra-entity inventory transfers create no net change in the financial position of the consolidated reporting entity. consolidated statements reflect only transactions with outside parties.

Company A accounts for its investment in subsidiary using the equity method. Company B uses the initial value method. Both companies have intra-entity gross profits in their consolidated inventories from downstream sales. Comparing Exhibits 5.7 and 5.4, how are the final consolidated totals affected by the investment accounting method choice?

No effect.

In preparing consolidated financial statements when intra-entity gross profits remain in ending inventory, Consolidation Entry G debits COGS because

the debit to COGS reduces consolidated net income by the amount of the intra-entity gross profit. the ending inventory component of COGS is overstated by the intra-entity gross profit remaining at year-end.

In periods subsequent to an intra-entity depreciable asset transfer (at a gain), Consolidation Entry *TA is modified when the parent applies the equity method and the transfer was downstream. The modification replaces the adjustment to the parent's retained earnings with an adjustment to the Investment in Subsidiary account because ________.

the debit to the Investment in Subsidiary account is needed to bring that account to zero in consolidation. the equity method has already reduced the parent's retained earnings for the intra-equity gain.

How does the direction of intra-entity land transfers (resulting in intra-entity gain on sale) affect the computation of the noncontrolling interest's share of consolidated net income?

Upstream land transfers affect the computation.

When the parent applies the equity method and routinely transfers inventory downstream to its 80% owned subsidiary, any intra-entity gross profits remaining in the consolidated entity's ending inventory,

are allocated 100% to the parent company's share of consolidated net income.

When the parent applies the equity method and routinely transfers inventory downstream to its 80% owned subsidiary, any intra-entity gross profits remaining in the consolidated entity's ending inventory, Multiple choice question.

are allocated 100% to the parent company's share of consolidated net income.

Because the individual companies comprising a consolidated entity frequently maintain separate accounting records, the effects of intra-entity inventory transfers

must be identified and removed as part of the process of preparing consolidated financial statements.

In the year of an intra-entity asset transfer at a price in excess of the asset's carrying amount, Consolidation Entry TA

restores the amount of accumulated depreciation removed when the sale was recorded on the selling entity's books. ensures the exclusion of the intra-entity gain in the consolidated income statement. restores the historical cost balance for the transferred asset.

When a parent sells land to its subsidiary at a profit, what is the effect on the noncontrolling interest.

No effect

In period's subsequent to a depreciable asset transfer (gain recorded) from a subsidiary to its parent, which of the following *TA adjustments remains constant over the remaining life of the asset?

The asset account

When the parent applies the equity method and routinely transfers inventory downstream, which of the following consolidation entries are sometimes needed to bring the Investment in Subsidiary account to a zero balance?

(*G) for intra-entity gross profits in beginning inventory. (I) for the equity in subsidiary earnings recognized by the parent. (D) for the parent's share of subsidiary dividends declared.

Which of the following Consolidation Entries has the net effect of increasing the current period's consolidated net income?

*G

In the presence of a 10% noncontrolling interest, how much intra-entity gross profit remaining in ending inventory should be eliminated in consolidation?

100%

The purpose of consolidation entry TI is to

remove the effects of intra-entity sales and purchases for the consolidated reporting entity.

In the year of an intra-entity asset transfer at a price in excess of the asset's carrying amount, Consolidation Entry ED

removes the overstatement of expense resulting from depreciating the inflated transfer price of the transferred asset. reduced accumulated depreciation for the current year's overstatement of depreciation expense.

When the parent applies the equity method and routinely transfers inventory downstream, Consolidation Entry *G involves a credit to COGS to recognize the intra-entity gross profit in beginning inventory and a debit to

the Investment in Subsidiary account.

In preparing consolidated financial statements when intra-entity gross profits remain in ending inventory, Consolidation Entry G credits Inventory because

From a consolidated perspective, the account is overstated by the amount of the intra-entity gross profit remaining in ending inventory.

When land is sold at a gain across members of a consolidated group, in years subsequent to the land sale, where does the gain reside?

In the seller's retained earnings account and the buyer's land account.

When intra-entity transfers of depreciable assets occur, what are the financial reporting objectives in preparing consolidated financial statements?

Recognize appropriate income effects from the sale and use of intra-entity transferred assets. Re-establish historical cost balances for the transferred assets. Defer intra-entity gains from intra-entity depreciable asset sales

When the parent applies the equity method and routinely receives upstream inventory transfers from a subsidiary, Consolidation Entry *G involves a credit to COGS to recognize the intra-entity gross profit in beginning inventory and a debit to

the subsidiary's retained earnings.

Similar to gross profits from intra-entity inventory transfers, the income effect of Consolidation Entries is allocated to the noncontrolling interest for

upstream transfers.

When a parent applies the equity method and upstream intra-entity gross profits exist in the beginning inventory, the debit to the subsidiary's Retained Earnings account in Consolidated Entry S ______ Consolidation Entry *G.

will decrease by the debit to the subsidiary's Retained Earnings account in

What is the effect on consolidated COGS of intra-entity gross profits in beginning and ending inventories?

Consolidated COGS is increased by intra-entity gross profits in ending inventory and decreased by intra-entity gross profits in beginning inventory.

Intra-entity gross profits in ending inventory are recognized in consolidated net income though a credit to COGS when the inventory is sold to outsiders. As a intra-entity transferred asset is used in the production process, the intra-entity gain is recognized in consolidated net income by consolidation entries that credit .

Blank 1: depreciation Blank 2: expense

Recognize appropriate income effects from the sale and use of intra-entity transferred assets. Re-establish historical cost balances for the transferred assets. Defer intra-entity gains from intra-entity depreciable asset sales

Blank 1: depreciation Blank 2: expense

Company A accounts for its investment in subsidiary using the equity method. Company B uses the initial value method. Both companies have intra-entity gross profits in their consolidated inventories from downstream sales. Comparing Exhibits 5.7 and 5.4 shows difference in consolidated totals resulting from the investment accounting (equity vs. initial value) method choice.

Blank 1: no, zero, or 0

How does the equity method adjust the parent's Equity in Earnings account for intra-entity gross profits in beginning inventories from upstream sales to an 80% owned affiliate?

80% of the intra-entity gross profits in beginning inventory are recognized.

How does the equity method adjust the parent's Equity in Earnings account for intra-entity gross profits in ending inventory from upstream sales to an 80% owned affiliate?

80% of the intra-entity gross profits in ending inventory are deferred.

Which of the following Consolidation Entries has the net effect of decreasing the current period's consolidated net income?

G

When an intra-entity sale has occurred, consolidation worksheet entry TI removes both the related purchase (through a credit to COGS) and a debit to the related account.

Blank 1: sales or revenue

After combining the individually recorded revenues of a parent and subsidiary, what is the effect on consolidated revenues of intra-entity inventory transfers?

Revenues from intra-entity transfers are not included in consolidated revenues.

How does the ASC describe the effect of intra-entity gross profit remaining in ending inventory on the noncontrolling interest?

Any intra-entity income or loss may be allocated between the parent and noncontrolling interest.

When the parent employs the equity method of accounting for its Investment in Subsidiary account, in consolidated financial reports the parent's Retained Earnings account will equal retained earnings.

Blank 1: consolidated

The accounting effects of intra-entity depreciable asset sales are removed in consolidation because no of the asset occurred with an outside entity.

Blank 1: sale or transfer

When intra-entity gross profits from upstream sales are present in beginning inventory, which of the following describes the effect on consolidated statements?

Consolidation Entry *G credits COGS which increases current period's consolidated net income. The net income effect of the intra-entity inventory gross profit is transferred from the prior period to the current period.

In period's subsequent to a depreciable asset transfer (gain recorded) from a subsidiary to its parent, which of the following individual affiliate accounts continue to be misstated from a consolidated perspective?

Depreciation expense. Accumulated depreciation. Retained earnings of the selling affiliate.

In the presence of upstream intra-entity inventory transfers, from a consolidated view which of the following accounts becomes overstated in the year following the transfer?

The subsidiary's retained earnings.

Compared to intra-entity gross profits in inventory, intra-entity gross profits from land transfers

can require consolidation entries to RE indefinitely until the land is sold to outsiders. can require consolidation entries to land indefinitely until the land is sold to outsiders.

When the parent applies the equity method and routinely transfers inventory downstream, any intra-entity gross profits remaining in the consolidated entity's ending inventory

does not affect the noncontrolling interest.

In the year of an intra-entity land transfer resulting in the recording of a gain, a consolidation entry is needed to

ensure the gain is not reported in the consolidated income statement. write-down the value of the land by the amount of the intra-entity gain.

As part of Consolidation Entry S, the debit to the subsidiary's RE is reduced due to intra-entity gross profits in beginning inventory. What effect does this reduction have on the beginning-of-the-year balance of the noncontrolling interest?

The beginning balance of the noncontrolling interest is entered as a smaller amount.

Inventory transfers among affiliates within a consolidated entity

produce accounting effects that are eliminated in the preparation of consolidated financial statements. create neither profits nor losses to the consolidated entity.

In periods subsequent to an intra-entity depreciable asset transfer (at a gain), Consolidation Entry *TA is modified when the parent applies the equity method and the transfer was downstream. The modification replaces the adjustment to the parent's retained earnings with _________.

the Investment in Subsidiary account.

Company A accounts for its investment in subsidiary using the equity method. Company B uses the initial value method. Both companies have intra-entity gross profits in their consolidated inventories from upstream sales. Comparing Exhibits 5.8 and 5.6, how are the final consolidated totals affected by the investment accounting method choice?

No effect

When an intra-entity sale of a depreciable asset occurs at a price in excess of the asset's carrying amount, which of the following result from a consolidated entity perspective?

Retained earnings of the selling affiliate become overstated. The carrying amount of the asset becomes overstated by the amount of the intra-entity gain. Depreciation expense becomes overstated.