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Consolidated Income Statement

Allen, Inc., owns all of the outstanding stock of Bowen Corporation. Amortization expense of $9,000 per year resulted from the original purchase. For 2004, the companies had the following account balances:
Allen Bowen
Sales 900,000 500,000
Cost of Goods Sold 400,000 300,000
Operations Expense 300,000 120,000
Investment Income not given 0
Dividends Paid 60,000 40,000

Intercompany sales of $200,000 occurred during 2003 and again in 2004. This merchandise cost $140,000 each year. Of the total transfers, $60,000 was still held on December 31, 2003, with
$45,000 unsold on December 31, 2004.

a. For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here?

b. Prepare a consolidated income statement for the year ending December 31, 2004.

Solution Preview

a. For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here?

Yes, it would because those 2 directions differ for the ...

Solution Summary

A consolidated income statement is prepared.

$2.19