Bunker Corporation owns 80 percent of Harrison Companys stoc

Bunker Corporation owns 80 percent of Harrison Company\'s stock. At the end of 20X8, Bunker and Harrison reported the following partial operating results and inventory balances Bunker arriso Corporation Company $ 693,000 $531,000 Total sales Sales to Harrison Company Sales to Bunker Corporation Net income Operating income (excluding investment income from 142,100 242,100 25,000 75,000 Harrison) Inventory on hand, December 31, 20X8, purchased from: 48,420 Harrison Company Bunker Corporation 42,630 Bunker regularly prices its products at cost plus a 40 percent markup for profit. Harrison prices its sales at cost plus a 20 percent markup. The total sales reported by Bunker and Harrison include both intercompany sales and sales to nonaffiliates. Required: a. What amount of sales will be reported in the consolidated income statement for 20X8? ount of sales ho 20Y8 consolidated income statement? (Do not

Solution

1)When there is intercompany sale happen then it will be excluded from consolidayed revenue

Sales recorded in consolidated profit and loss account:

total sales of B ltd. = 693000

Add: total sales of H ltd. = 531000

Less: Inter company sales = (384200) addition of 142100 and 242100

Total sales revenue = 839800$

2) Cost of goods sold during the year in consolidated FS:

B\'s total sales = 693000

Less: Inter company sale = 142100

net revenue = 550900

Cost of goods sold for B\'s sales=550900/140*100

= $393500

H\'s total sales = 531000

Less inter company sale = 242100

Net reve nue = 288900

Cost of sales of H: 288900/120*100

= 240750$

Total COGS= 393500+240750

= 529650$

3) Balance for Inventory in consolidated FS for the year:

B ltd. = 48420

H ltd. = 42630

Less: unrealised profit = 20250

[48420/120*20=8070

42630/140*40=12180]

Closing inventory = 70800$

4) Calculation of consolidated net income and controlling interest:

Sales = 839800

Less: COGS = 529650

Gross profit= 310150$

Add: operation income

B\'d ltd. = 75000

H\'s ltd. = 25100

consolidated Net income = 410250$ (GP+operating revenue)

Total controlling interst = [42630+48150(GP of H ltd.)]*20/100

=18156$