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Cindy Corp & Slingo: Adjusting and Consolidating Journal Entries

Based on American Accounting

Cindy Corp. owned all of the voting common stock of Slingo, inc. Both companies use the perpetual inventory method and Cindy decided to use the partial equity method to account for this investment. During 2009, Cindy made cash sales of $400,000 to Slingo. The gross profit rate was 30% of the selling price. By the end of the year, Slingo had used 75% of the goods.

Gross Profit = $120,000
COGS = $280,000 (400,000 * 75%)
Marginal Cost Markup = 42.857%

No additional inventory was sold during 2010

The same ending balance of the deferred gross profit from the end of 2009 exists at the end of 2010

1. What are the journal entries for Cindy and Slingo to record the sales/purchases in 2009?

2. Prepare the consolidation entries that should be made at the end of 2009 for this inventory transfer

3. Prepare any 2010 consolidation entries that would be required for this inventory transfer hide problem

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Question 1
Dr: Cash 400,000
Cr: Sales 400,000

Dr: Cost of goods sold (400,000*.7) 280,000
Cr: Merchandise inventory 280,000

Dr: Merchandise inventory 400,000
Cr: Cash 400,000

Dr: Cash (120,000+300,000) 420,000
Cr: ...

Solution Summary

The expert adjusts and consolidating journal entries.