Gargiulo Company, a 90% owned subsidiary of Posito Corporation

Gargiulo Company, a 90% owned subsidiary of Posito Corporation

REFERENCE: Ref. 05_07

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Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price.  The following data are available pertaining to intra-entity purchases.  Gargiulo was acquired on January 1, 2010.

 

 

 

 

 

2010

 

2011

 

2012

 

Purchases by Posito

 

$8,000

 

$12,000

 

$15,000

 

Ending inventory on Posito’s books

 

  1,200

 

    4,000

 

    3,000

 

 

Assume the equity method is used. The following data are available pertaining to Gargiulo’s income and dividends.

 

 

 

 

2010

 

2011

 

2012

 

Gargiulo’s net income

 

$70,000

 

$85,000

 

$94,000

 

Dividends paid by Gargiulo

 

 10,000

 

  10,000

 

  15,000

 

 

 

QUESTION #21

 

REFER TO: Ref. 05_07

 

50.  Compute the equity in earnings of Gargiulo reported on Posito’s books for 2010.

 

A)  $63,000.

 

B)  $62,730.

 

C)  $63,270.

 

D)  $70,000.

 

E)  $62,700.

 

QUESTION #22

 

REFER TO: Ref. 05_07

 

56.  For consolidation purposes, what amount would be debited to cost of goods sold for the 2010 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise?

 

A)  $300.

 

B)  $240.

 

C)  $2,000.

 

D)  $1,600.

 

E)  $270.

QUESTION #23

 

REFER TO: Ref. 05_07

 

59.  For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2010 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise?

 

A)  $0.

 

B)  $1,600.

 

C)  $300.

 

D)  $240.

 

E)  $270.

 

 

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