REFERENCE: Ref.05_12 Virginia Corp.owned All of the Voting Common Stock of Stateside

question 36

Essay

REFERENCE: Ref.05_12
Virginia Corp.owned all of the voting common stock of Stateside Co.Both companies use the perpetual inventory method,and Virginia decided to use the partial equity method to account for this investment.During 2009,Virginia made cash sales of $400,000 to Stateside.The gross profit rate was 30% of the selling price.By the end of the year,Stateside had used 75% of the goods.
-Prepare the consolidation entries that should be made at the end of 2009.

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Definitions:

Agency Relationship

A legal relationship between two parties, where one (the agent) is authorized to act on behalf of the other (the principal) in legal or business dealings.

Specific Power

Authority granted to an individual or body to carry out specific actions in a designated context or situation.

Agency Agreement

A legal contract creating a fiduciary relationship which empowers an agent to act on behalf of a principal in transactions.

Apparent Agency

A legal concept where a principal is liable for the acts of their agent, based on the appearance of authority the agent has been given, even if no actual authority was given.