[jimboace88]

I always saw myself as pretty strong on consolidations, but I am struggling with intercompany sales of merchandise or depreciable equipment as I go through my review. All of the other intercompany matters (sale of land, receivables/payables) are fine and I can knock those out without a problem.

The problem for me is that even after watching the Becker lecture on this topic and reviewing the test and notes, I get to a problem asking me to deal with an intercompany sale of inventory and I just can NOT arrive at the right answer!

Does anyone have any tricks or easier ways of understanding this? I appreciate any suggestions!

FAR 07/27/11 - 87
AUD 10/01/11 - 85
BEC 11/15/11 - 87
REG 01/03/12 - 92

[ak311]

I'm using Becker, I'm on intercompany transactions right now. I've found that the text, lectures, and examples are way too simplistic in comparison to the MCQ asked. My strategy will probably be just to do all the MCQ, and make sure I understand why when I miss one. After going through this once the text hasn't been a big help. Good luck.

FAR - F (2011), 5/16
AUD - F(2011)
BEC -
REG -

2nd attempt at this thing. Time to get serious.

[Anonymous]

Hi,

I just got done with this section and was confused as well.

Here are my tips:

Do the journal entries for both entities ie

Parent selling…

Interco Ar 100000

Interco Sales 100000

Interco Cogs 60000

Inventory (The profit that needs to be eliminated!) 60000

Sales-cogs=profit (40000 profit in this case)

Subidiary Buying

Inventory 100000 (bcuz sold from parent at that price)

Interco AP 100000

Lets say 20000 is left in ending inventory

Everything interco needs to be eliminated!

Interco Sales 100000

Interco Cogs 60000

Cogs (hard part)

INV (hard part)

well we know it has to be 40000 so how do we divide it up?

Use

Beg Inv+Purchase-Ending Inventory= COGS

The trick is to use the person buying it!

So the sub purchased 100000, had 0 in beg inv, and had 20000 in ending inv)

0+100000-20000=80000

Fun part EI and COGS remember we need that for our journal entry

so use purchases of 100000 and say that 20000 is 20% of 100000 so only 40000*20%=8000

and finally cogs = 80000/100000 =80%

80% of 40000 is 32000

what do you know 32000+8000= the 40000 we need!!!

Therefore…

Interco Sales 100000

Interco Cogs 60000

Cogs (hard part)

INV (hard part)

Interco Sales 100000

Interco Cogs 60000

Cogs 32000

INV 8000

oh and get rid of any interco AR and interco AP if it remains thats simple (Credit and Debit respectively)

I hope that helps!

If not ill try again

[Anonymous]

i had spaces but if you want i can re-copy and add Dr and Cr if you need it

[jimboace88]

diesuperfly, that was amazing! Thank you so much. I've been really working to get this down because it's tricky to me for some reason. Some similar problems came up in F4 that gave me practice calculating how to allocate between COGS and EI as well, so I'm feeling a little more confident. Thankfully I have at least a month to keep practicing and nail this concept.

Your explanation really helped me with the theory, which is where I was struggling. A quote from my favorite professor I like to keep in mind whenever I'm doing something hard is “don't memorize–UNDERSTAND.” Thanks again!

FAR 07/27/11 - 87
AUD 10/01/11 - 85
BEC 11/15/11 - 87
REG 01/03/12 - 92

[Santino12]

Superfly, I have to thank you also. I was just reviewing this for the 2nd time and realized how little I truly understood it. Thanks again!

[Anonymous]

No problem at all, I take far in a week….so nervous…becker did a very poor job in this section! However, I feel as though it won't be that big of a deal on the test maybe 1 or 2 easy questions! Remember a mile wide, inch deep.

[kessynicole]

OMG!! Three years later and you've given me my epiphany on these intercompany entries diesuperfly. You are MOST DEFINITELY SUPERFLY!!! I take my test on Monday. 🙂

REG - 91
BEC - 89
FAR - 89
AUD - 97

I'm DONE BY PRAYER AND BY FAITH!! GOD IS GOOD!! Used Becker to study...supplemented by the Bible.

[LongShot]

Superfly's exactly right-write them out and then reverse them. I just start working for a bank with a LOT of subsidiary banks and eliminating entries were driving me crazy! Finally just started writing the correct initial entries and reversing to get to the right entries to make.

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[Author]

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