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Consolidated Totals: Intercompany Transactions

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1. (TCO 1) Wathan Inc. sold $180,000 in inventory to Miller Co. during 2008, for $270,000. Miller resold $108,000 of this merchandise in 2008 with the remainder to be disposed of during 2009.
Required: Assuming Wathan owns 25% of Miller and applies the equity method, prepare the journal entry Walthan should have recorded at the end of 2008 to defer the unrealized inter-company inventory profit? Show all of your work to arrive at the amount in your journal entry. Showing only the answer will result in zero points.

3. (TCO 3) What is pre-acquisition income? Be Specific

4. (TCO 3) Pennant Corp. owns 70% of the common stock of Scarvens Co. Scarvens' revenues for 2009 totaled $200,000.
Required: What amount of Scarvens' revenues would be included in the consolidated total under the economic unit concept?

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This solution provides responses to that shows the journal entries necessary to defer unrealized inter-company inventory profit; tells what is pre-acquisition income; and shows how revenue is determined under the economic unit concept.

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1. (TCO 1) Wathan Inc. sold $180,000 in inventory to Miller Co. during 2008, for $270,000. Miller resold $108,000 of this merchandise in 2008 with the remainder to be disposed of during 2009.
Required: Assuming Wathan owns 25% of ...

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