advanced exam 2 chapter 5

why do intra-entity transactions occur so frequently?

to maximize operational efficiency and financial synergy

in consolidating two companies, what amount of intra-entity transactions would be eliminated?

100%

what is the primary reason we defer recognition of gross profits on intra-entity sales for goods that remain in inventory at year-end?

when intra-entity sales remain in ending inventory, control of the goods has not changed

how do you calculate intra-entity profit remaining in inventory at year-end?

ending inventory value * profit-margin ratio

how do you calculate intra-entity ending inventory value when solving for intra-entity profit?

(total selling price / units sold)

* units remaining in inventory

how do you calculate the intra-entity profit margin ratio when solving for intra-entity profit?

markup / (cost (1) + markup)

how do you calculate intra-entity unrealized gross profit?

(total selling price * % of inventory left)

* seller’s gross profit rate

how do you calculate consolidated sales revenue in intra-entity transactions?

parent’s sales revenue

+ subsidiary’s sales revenue

- intra-entity sales revenue

how do you calculate consolidated inventory in intra-entity transactions?

parent’s inventory

+ subsidiary’s inventory

- unrealized gross profit

how do you calculate the gross-profit rate in intra-entity transactions?

(seller’s sales revenue - COGS) / seller’s sales

how do you calculate consolidated COGS in intra-entity transactions?

parent’s COGS

+ subsidiary’s COGS

- intra-entity sales revenue

+ unrealized gross profit

OR

( - realized profit + deferred profit )

how do you calculate noncontrolling interest in intra-entity transactions?

seller's net income

+ realizeed gross profit

- deferred gross profit

* NCI share of adjusted income