Consolidation On January 1, 20X1, Sticky Company purchases 70 percent of the common stock of Wicket Corporation for its underlying book value of $420,000. Sticky accounts for its investment in Wicket using the equity method. Information about the two companies as of the date of combination and for the years 20X1 and 20X2 is as follows: Sticky Company Wicket Corporation Common Stock, Jan 1, 20X1 $2,000,000 $350,000 Retained Earnings, Jan 1, 20X1 $750,000 $250,000 20X1: Separate operating income, Sticky: $350,000 Net income, Wicket: $200,000 Dividends: $100,000 $80,000 20X2: Separate operating income, Sticky: $400,000 Net income, Wicket: $250,000 Dividends: $100,000 $80,000 On March 1, 20X1, Sticky buys inventory for $25,000 and resells it to Wicket for $30,000 on April 1, 20X1. Both companies use perpetual inventory systems. Required a. Assume that Wicket sells the inventory to an outside party for $35,000 on November 1, 20X1. Calculate the amounts of gross profit related to the intercorporate transfer for Sticky and Wicket. b. The entry to eliminate the intercompany inventory sale for the consolidation workpaper would include? c. Assume instead that Wicket sells the inventory to an outside party for $35,000 on February 1, 20X2. What are the entries to eliminate the downstream sale of inventory on the consolidation workpaper for 20X1. d. Assuming the facts given in the previous question, in which Wicket does not sell the inventory until February 1, 20X2, what is consolidated net income for the combined entity for 20X1? e. When Wicket sells the inventory on February 1, 20X2 for $35,000 to an outside party, the entry to eliminate the beginning inventory profit on the consolidation workpaper is? f. Sticky Company’s separate realized income for the year ended 20X2 would be? g. If Wicket continues to hold the inventory throughout 20X2 and for subsequent years, the eliminating entry necessary to eliminate the beginning inventory profit each year until the inventory is sold would be?
How urgent could this really be on Dec. 1st? Also, PLEASE tell me that equity method consolidation is not on L3 too…
this is definitely LII. the question is rather long… highlight the key point you need assistance on and let focus on it…
Yup, that is way too much to think about this early in December.
ha ha
oops, responded to this on the wrong forum. this reads like homework.
Lol. this thread was posted on level II forum 2. I doubt this is CFA material, honestly.