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Placid Lake’s 2018 net income before consideration of its relationship with Scenic and before adjustments for intra-entity sales was

Placid Lake’s 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period; Scenic paid $40,000. At the end of 2018, selected figures from the two companies’ balance sheets were as follows:

___________________________________________ Placid Lake _________________ Scenic

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000 . . . . . . . . . . . . . . . . $ 90,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 . . . . . . . . . . . . . . . . . .200,000

Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 . . . . . . . . . . . . . . . . . 300,000

During 2017, intra-entity sales of $90,000 (original cost of $54,000) were made. Only 20 percent of this inventory was still held within the consolidated entity at the end of 2017. In 2018, $120,000 in intra-entity sales were made with an original cost of $66,000. Of this merchandise, 30 percent had not been resold to outside parties by the end of the year.

Apr 26 2020 View more View Less

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