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McGraw Corp

question 22

Essay

McGraw Corp. owned all of the voting common stock of both Ritter Co. and Lawler Co. During 2011, Ritter sold inventory to Lawler. The goods had cost Ritter $65,000, and they were sold to Lawler for $100,000. At the end of 2011, Lawler still held 30% of the inventory.
Required:
How should the sale between Lawler and Ritter be accounted for in a consolidation worksheet? Show worksheet entries to support your answer.


Definitions:

Nominal-Level

Classification of data, for which the measurement scales are categorized without any order or ranking implied among the values.

Coefficient of Determination

A numerical indicator showing the fraction of the variance in a dependent variable accounted for by one or more independent variables within a regression analysis.

Variance

A measure of how much values in a dataset differ from the mean of that dataset.

Phi

A measure of association for two binary variables, reflecting the strength and direction of their relationship.

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