Barnes Company Acquired 80 Percent of the Outstanding Voting Stock

question 42

Essay

Barnes Company acquired 80 percent of the outstanding voting stock of Dean Company on January 1,2008.During 2008 Dean Company sold inventory costing $50,000 to Barnes Company for $80,000.Barnes Company continued to hold the inventory at December 31,2008.Also during 2008,Barnes Company sold merchandise costing $400,000 to nonaffiliates for $600,000,and on its separate balance sheet reported total inventory at year end of $140,000.In its separate financial statements,Dean Company reported total sales and cost of goods sold of $350,000 and $220,000,respectively,for 2008 and ending inventory of $150,000.
Required: Based on the above information,compute the amounts that should appear in the consolidated financial statements prepared for Barnes Company and it subsidiary,Dean Company,at year end for the following items: 1)sales;2)cost of goods sold;3)gross profit on sales;4)inventory.

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Definitions:

Hedged Delivery

A strategy used in trading and finance to minimize risk by taking compensating positions in related securities or commodities.

Futures Contracts

Legal agreements to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Profit (Loss)

Profit or loss refers to the financial result that is calculated by subtracting total expenses from total revenues, with profit indicating a positive result and loss indicating a negative result.

Silver

A precious metal with high electrical and thermal conductivity, used in jewelry, silverware, and industrial applications.