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Running head: PARTIAL EQUITY ELIMINATION ENTRIES Partial equity elimination entries Name Institutional affiliation Date 1 PARTIAL EQUITY ELIMINATION ENTRIES 2 QUESTION ONE- ELIMINATION ENTRIES To illustrate, Little transferred inventory costing 52 to Big, a related company for 104 and hence recording a gross profit of 52 Consolidation Entry Sales Cost of goods sold To eliminate effect of intercompany transfer of inventory 104 104 To record intercompany gross profit Cost of goods sold (ending inventory component) Inventory To remove portion of intercompany gross profit that is realized in year of transfer Percentage resold in 2020 is 55% 52 52 Therefore, Little resold 55% x 104 = 57.2 Mark up = 52/104 = 50% Retained inventory will have value of 50% x (104-57.2) = 23.4 55% of inventory remains (replaces previous entry) on 2020 Cost of goods sold (ending inventory component) Inventory To remove portion of intercompany gross profit that is realized in year of transfer 23.4 23.4 Consolidated entry year following transfer (Year 2) Retained earnings (Beginning balance of seller) Cost of goods sold (Beginning inventory component) To remove unrealized gross profit from beginning figures so that it is recognized currently in the period in which the earning process is completed. 23.4 Percentage resold in 2021 is 35% Therefore, Little resold 35% x 57.2 = 20.2 Mark up = 52/104 = 50% Retained inventory will have value of 50% x (57.2-20.2) = 18.5 23.4 PARTIAL EQUITY ELIMINA ...
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