Given the Following Separate Company Balance Sheets and Income Statements

question 97

Short Answer

Given the following separate company balance sheets and income statements, answer the following questions.

Additional information:
Plea acquired its investment in the stock of Settle on the date of Settle’s incorporation.
Consolidated accounts receivable is $80,000.
Consolidated sales total $900,000.
No purchases from Settle remain in Plea’s ending inventory.

Required:

a. What percentage of Settle does Plea appear to own?
b. What is beginning retained earnings of Plea?
c. How much was Plea’s initial investment in Settle?
d. What is the amount of intercompany accounts receivable?
e. What is consolidated cost of goods sold?

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Definitions:

Periodic Basis

A method of accounting where financial and inventory records are updated at regular, fixed intervals.

Resale Value

The expected price at which an asset can be sold in the market after it has been used.

Incremental Costs

The additional costs incurred when a company increases production by one unit.

Special Order

An order that deviates from the normal production process or product line, often requiring special pricing and handling.