Rome Inc. owns 30% of Amber Co. and applies the equity method. During the current year, Rome bought inventory costing $66,000 and then sold it to Amber for $120,000. At year-end, only $24,000 of merchandise was still being held by Amber. What amount of intercompany inventory profit must be deferred by Rome

Question

Avah Dunlap

Business

28 June, 14:05

Rome Inc. owns 30% of Amber Co. and applies the equity method. During the current year, Rome bought inventory costing $66,000 and then sold it to Amber for $120,000. At year-end, only $24,000 of merchandise was still being held by Amber. What amount of intercompany inventory profit must be deferred by Rome

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Derek Glass · Answer 1

Amount of intercompany inventory profit must be deferred by Rome=$3240

Explanation:

Inventory at year-end $ 24,000.00

Gross profit markup ($54,000 : $120,000) * 0.45

Unrealized gain $ 10,800

Ownership share * 0.30

Intercompany unrealized gain - deferred $ 3,240