ACC 4100 Chapter Notes - Chapter 5: Gross Profit
11 Jun 2018
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Subsidiary has sold some inv. And retained some inventory
What do we need to do?
· Defer profit
· Eliminate unrealized gross profit entry G is based not on total intra-entity sales
· (as if no sales at the end of the day)
Parent 20,000 inv sells to sub à 35,000
Parent
Dr A/R 35
Cr Sales 35
COGS 20
Inv 20
Sub
Inv 35
A/P 35
Gross profit= gross profit/ total sales
Sales- cogs
35 -20= 15
15/35= .428 GPM
back out profits using 42.86% as how much profit we need to back out
Cont: At YE Subsidiary has $6,000 of inv left (OF SUB’S COST) Full RETAIL COST
Don’t care what sub sells it for
Care about what parent sold it for
6000/35000 (left in inv @ YE)
Now we need to remove profit of 6,000 parent got
6,000 * .4286= 2,571 (We must defer profit in the books in consolidated entry)
Consolidation entry G
Remove that profit
COGS 2571
Inv 2571
Defer to next period
