Akuntansi Keuangan Lanjutan 1 - Intercompany Inventory Transactions

Intercompany Inventory Transactions

1. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-11
Intercompany
Inventory
Transactions7
Electronic Presentation by
Douglas Cloud
Pepperdine University
Baker / Lembke / KingBaker / Lembke / King

2. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-22
Transactions of Affiliated CompaniesTransactions of Affiliated Companies
•Inventory transactions are the most common
form of intercorporate exchange.
•Significantly, the consolidation procedures
relating to inventory transfers are quite similar
to fixed assets.
•The eliminations ensure that only the historical
cost of the inventory to the consolidated entity
is included in the consolidated balance sheet
when the inventory is still on hand and is
charged to cost of goods sold in the period the
inventory is resold to nonaffiliates.

3. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-33
Transactions of Affiliated CompaniesTransactions of Affiliated Companies
Parent
Company
Subsidiary
A
Subsidiary
B
Consolidated EntityConsolidated Entity

4. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-44
Aspects of Workpaper EliminationAspects of Workpaper Elimination
When intercorporate sales include
profits or losses, there are two aspects
of the workpaper elimination needed in
the period of transfer to prepare
consolidated financial statements.

5. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-55
Elimination of the income statement effects of
the intercorporate sale in the period in which the
sale occurs, including the sales revenue from the
intercorporate sale and the related cost of goods
sold recorded by the transferring affiliate.
Elimination from the inventory on the balance
sheet of any profit or loss on the intercompany
sale that has not been confirmed by resale of the
inventory to outsiders.
Aspects of Workpaper EliminationAspects of Workpaper Elimination

6. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-66
Downstream Sale–Perpetual System
•Consolidated net income must be based on the
realized income of the transferring affiliate.
•Because intercompany profits from
downstream sales are on the books of the
parent, consolidated net income and the overall
claim of parent company shareholders must be
reduced by the full amount of the unrealized
profits.

7. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-77
PT Induk
Consolidated EntityConsolidated Entity
March 1,
20X1


Purchased
inventory for
Rp7,000,000
Downstream Sale -- Perpetual InventoryDownstream Sale -- Perpetual Inventory
PT Anak
PT IndukPT Induk
Mar. 1 Inventory 7,000,000
Cash 7,000,000
Purchase of inventory.
Same PeriodSame Period

8. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-88
PT Induk PT Anak
Consolidated EntityConsolidated Entity
April 1, 20X1
Intercorporate
transfer of
inventory
Rp10,000,000
Downstream Sale -- Perpetual InventoryDownstream Sale -- Perpetual Inventory
PT IndukPT Induk
Apr. 1 Cash 10,000,000
Sales 10,000,000
Sale of inventory to PT Anak.
PT IndukPT Induk
Apr. 1 Cost of Goods Sold7,000,000
Inventory 7,000,000
Cost of inventory sold to PT Anak.
PT AnakPT Anak
Apr. 1 Inventory 10,000,000
Cash 10,000,000
Purchase of inventory from PT Induk.
Same PeriodSame Period

9. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-99
PT Induk PT Anak
Consolidated EntityConsolidated Entity
Downstream Sale -- Perpetual InventoryDownstream Sale -- Perpetual Inventory
Nov. 5, 20X1
Sell
inventory for
Rp15,000,000
PT AnakPT Anak
Nov. 5 Cash 15,000,000
Sales 15,000,000
Sale of inventory to Nonaffiliated.
PT AnakPT Anak
Nov. 5 Cost of Goods Sold10,000,000
Inventory 10,000,000
Cost of inventory sold to Nonaffiliated.
Same PeriodSame Period

10. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1010
Downstream Sale -- Perpetual InventoryDownstream Sale -- Perpetual Inventory
Item PT Induk PT Anak Unadjusted Consolidated
Totals Amounts
Sales Rp10,000,000 Rp15,000,000 Rp25,000,000 Rp15,000,000
Cost of goods
sold -7,000,000 -10,000,000-17,000,000 -7,000,000
Gross profitRp 3,000,000 Rp 5,000,000 Rp 8,000,000 Rp 8,000,000
20X120X1

11. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1111
Downstream Sale -- Perpetual InventoryDownstream Sale -- Perpetual Inventory
Gross profit of Rp8,000,000 is correct from a
consolidated viewpoint, but consolidated sales and cost
of goods sold should be Rp15,000,000 and Rp7,000,000
respectively, rather than Rp25,000,000 and
Rp17,000,000. In the consolidation workpaper, the
intercompany sale must be eliminated.
Sales 10,000,000
Cost of goods sold 10,000,000
Eliminate intercompany inventory sale.

12. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1212
Resale in Period Following TransferResale in Period Following Transfer
PT Induk
Consolidated EntityConsolidated Entity
March 1,
20X1


Purchased
inventory for
Rp7,000,000
PT Anak
April 1,
20X1

Inter-
corporate
transfer of
inventory
Rp10,000,000
January 2,
20X2


Sell inventory
for
Rp15,000,000

13. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1313
Basic Equity-Method Entries--20X1Basic Equity-Method Entries--20X1
During 20X1, PT Induk records its pro rata portion of PT
Anak’ net income and dividends for 20X1:
(9) Investment in PT Anak Stock40,000,000
Income from Subsidiary 40,000,000
Record equity-method income.
(8) Cash 24,000,000
Investment in PT Anak
Stock 24,000,000
Record dividends from PT Anak.
Rp30,000,000 Rp30,000,000
x .80x .80
Rp50,000,000 Rp50,000,000
x .80x .80

14. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1414
Income from
Subsidiary 40,000
Dividends
Declared (60,000)(30,000)
Investment in
PT Anak 256,000
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
Income from
Subsidiary 40,000
Dividends
Declared (60,000)(30,000)
Investment in
PT Anak 256,000
An entry is needed to eliminate PT Induk’s
share of PT Anak’ income and dividends. This
entry also eliminates the change in the
investment account for the period.
Income from
Subsidiary 40,000 (l0) 40,000
Dividends
Declared (60,000)(30,000) (10) 24,000
Investment in
PT Anak 256,000 (10) 16,000
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

15. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1515
The noncontrolling interest is assigned a pro rata portion of the
net income of PT Anak. Also, the noncontrolling stockholders’
share of PT Anak’ dividends is eliminated and the
noncontrolling interest is increased to reflect the excess of PT
Anak’ income over its dividends.
Income to Non-
controlling
Interest
Dividends
Declared (60,000)(30,000) 24,000
Noncontrolling
Interest
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
Income to Non-
controlling
Interest
Dividends
Declared (60,000)(30,000) (10) 24,000
Noncontrolling
Interest
(11) 10,000 (10,000)

(11) 6,000 (60,000)
(11) 4,000
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

16. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1616
Retained Earnings,
January 1 300,000100,000
Investment in
PT Anak 256,000 (10) 16,000
Common Stock--
PT Anak 500,000200,000
Noncontrolling
Interest (11) 4,000
An entry is needed to eliminate the beginning balances of PT Anak’
stockholders’ equity accounts and PT Induk’s investment account. This entry
also needs to establish the noncontrolling interest at the beginning of the period.
,
(12)100,000 300,000
(12) 240,000
(12)200,000 500,000

(12) 60,000 64,000
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

17. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1717
Downstream Sale -- Inventory Not ResoldDownstream Sale -- Inventory Not Resold
Item PT Induk PT Anak Unadjusted Consolidated
Totals Amounts
Sales Rp10,000,000 Rp -0- Rp10,000,000 Rp -0-
Cost of goods
sold -7,000,000 -0- -7,000,000 -0-
Gross profitRp 3,000,000 Rp -0- Rp 3,000,000 Rp -0-
InventoryRp -0- Rp10,000,000Rp10,000,000 Rp7,000,000
20X120X1

18. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1818
Sales 400,000200,000
Cost of Goods
Sold 170,000115,000
Inventory 100,00075,000
An entry is required to eliminate the effects of the
intercompany sale of inventory.
(13) 10,000 590,000
(13) 7,000 278,000
(13) 3,000 172,000
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

19. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-1919
Consolidated Net Income--20X1Consolidated Net Income--20X1
PT Induk’s separate operating income Rp140,000,000
Less: Unrealized intercompany profit
on downstream inventory sale -3,000,000
PT Induk’s separate realized income Rp137,000,000
PT Induk’s share of PT Anak’ income:
PT Anak’s net income Rp50,000,000
PT Induk’s proportionate sharex .80 40,000,000
Consolidated net income, 20X1 Rp177,000,000

20. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2020
Basic Equity-Method Entries--20X2Basic Equity-Method Entries--20X2
During 20X2, PT Induk records its pro rata portion of PT
Anak’ net income and dividends for 20X2:
(15) Investment in PT Anak Stock60,000,000
Income from Subsidiary 60,000,000
Record equity-method income.
(14) Cash 32,000,000
Investment in PT Anak
Stock 32,000,000
Record dividends from PT Anak.
Rp40,000,000 Rp40,000,000
x .80x .80
Rp75,000,000 Rp75,000,000
x .80x .80

21. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2121
Income from
Subsidiary 60,000
Dividends
Declared (60,000(40,000)
Investment in
PT Anak 284,000
An entry is needed to eliminate the effects
of income from PT Anak and from PT
Induk’s share of dividends.
(16) 60,000
(16) 32,000
(16) 28,000
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)
)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

22. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2222
Income to
Noncontrolling
Interest
Dividends
Declared (60,000)(40,000) (16) 32,000
Noncontrolling
Interest
An entry is needed to assign the noncontrolling
shareholders their share of income and establish the
20X2 increase in the claim of noncontrolling
shareholders on the net assets of PT Anak.
Consolidation Workspaper--20X2Consolidation Workspaper--20X2 (in ‘000) (in ‘000)
(17)15,000 (15,000)

(17) 8,000 (60,000)
(17) 7,000
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

23. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2323
A workpaper entry is needed to eliminate the beginning
stockholders’ equity balances of PT Anak and PT
Induk’s beginning investment balance.
Retained Earnings,
January 1 420,000120,000
Investment in
PT Anak 284,000 (16) 28,000
Common Stock 500,000200,000
Noncontrolling
Interest (17) 7,000
(18)120,000 420,000
(18)256,000
(18)200,000 500,000
(18) 64,000 71,000
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

24. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2424
Downstream Sale -- Inventory Not ResoldDownstream Sale -- Inventory Not Resold
Item PT Induk PT Anak Unadjusted Consolidated
Totals Amounts
Sales Rp -0- Rp 15,000,000 Rp15,000,000 Rp 15,000,000
Cost of goods
sold -0- (10,000,000) (10,000,000)(7,000,000)
Gross profitRp -0- Rp 5,000,000 Rp 5,000,000 Rp 8,000,000
20X220X2

25. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2525
An entry is required to eliminate
beginning inventory profit.
Cost of Goods
Sold 180,000160,000
Retained Earnings,
January 1 420,000120,000(18)120,000
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)
(19) 3,000 337,000
(19) 3,000 417,000
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

26. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2626
Consolidated Net Income--20X2Consolidated Net Income--20X2
PT Induk’s separate income
Rp160,000,000
Realization of deferred intercompany profit
3,000,000
PT Induk’s separate realized income
Rp163,000,000
PT Induk’s share of PT Anak’s income:
PT Anak’ net income Rp75,000,000
PT Induk’s proportionate share x .80
60,000,000
Consolidated net income, 20X2
Rp223,000,000

27. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2727
If Inventory Held > 2 periods
Retained Earnings xxx
Inventory xxx
For Previous PT Induk Case:
Retained Earnings 3,000,000
Inventory 3,000,000

28. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2828
Upstream Sale–Perpetual System
•When an upstream sale of inventory occurs and
the inventory is resold by the parent to a
nonaffiliate during the same period
–All the eliminating entries in the consolidation work
paper are identical to those in the downstream case.
•When the inventory is not resold to a nonaffiliate
before the end of the period
–work paper eliminating entries are different from the
downstream case only by the apportionment of the
unrealized intercompany profit to both the controlling
and noncontrolling interests.

29. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-2929
Upstream Sale--Perpetual InventoryUpstream Sale--Perpetual Inventory
PT Induk
Consolidated EntityConsolidated Entity
March 1,
20X1


Purchased
inventory for
Rp7,000,000
PT Anak
April 1,
20X1


Inter-
corporate
transfer of
inventory
Rp10,000,000
Jan. 2
20X2


Sell inventory
for
Rp15,000,000

30. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3030
Basic Equity--Method Entries--20X1Basic Equity--Method Entries--20X1
(22) Investment in PT Anak
Stock 40,000,000
Income from Subsidiary40,000,000
Record equity-method income.
(21) Cash 24,000,000
Investment in PT Anak
Foods Stock 24,000,000
Record dividends from PT Anak.
Rp50,000,000 Rp50,000,000
x .80x .80
Rp50,000,000 Rp50,000,000
x .80x .80

31. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3131
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
An entry is needed to eliminate the effects
of income from PT Anak and from PT
Induk’s share of dividends.
Income from
Subsidiary 40,000
Dividends
Declared (60,000(30,000)
Investment in
PT Anak 256,000
(23) 40,000

(23) 24,000
(23) 16,000
)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

32. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3232
The noncontrolling interest is assigned a pro rata portion of the
net income of PT Anak. Also, the noncontrolling stockholders’
share of PT Anak’ dividends is eliminated and the
noncontrolling interest is increased to reflect the excess of PT
Anak’ income over its dividends.
Income to Non-
controlling
Interest
Dividends
Declared (60,000)(30,000) 24,000
Noncontrolling
Interest
Income to Non-
controlling
Interest
Dividends
Declared (60,000)(30,000) (23) 24,000
Noncontrolling
Interest
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
-
(24) 9,400 (9,400)
(24) 6,000 (60,000)
(24) 3,400
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

33. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3333
Retained Earnings,
January 1 300,000100,000
Investment in
PT Anak 256,000 (23) 16,000
Common Stock 500,000200,000
Noncontrolling
Interest (24) 3,400
An entry is needed to eliminate the beginning balances of PT
Anak’ stockholders’ equity accounts and PT Induk’s
investment account. This entry also needs to establish the
noncontrolling interest at the beginning of the period.
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
(25)100,000 300,000
(25) 240,000
(25)200,000 500,000
(25) 60,000 63,400
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

34. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3434
An entry is required to eliminate the
intercompany upstream sale of inventory.
Consolidation Workpaper--20X1Consolidation Workpaper--20X1 (in ‘000) (in ‘000)
Sales 400,000200,000
Cost of Goods
Sold 170,000115,000
Inventory 100,00075,000
(26)10,000 590,000
(26) 7,000 278,000
(26) 3,000 172,000
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

35. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3535
Consolidated Net Income--20X1Consolidated Net Income--20X1
PT Induk’s separate operating income Rp140,000,000
PT Induk’s share of PT Anak’
income:
PT Anak’s net income Rp50,000,000
Less: Unrealized intercompany
profit on upstream inven-
tory sale -3,000,000
PT Anak’ realized incomeRp47,000,000
PT Induk’s proportionate sharex .80 37,600,000
Consolidated net income, 20X1 Rp177,600,000

36. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3636
Basic Equity--Method Entries--20X2Basic Equity--Method Entries--20X2
(28) Investment in PT Anak
Stock 60,000,000
Income from Subsidiary 60,000,000
Record equity-method income.
(27) Cash 32,000,000
Investment in PT Anak
Stock 32,000,000
Record dividends from PT Anak.
Rp75,000,000 Rp75,000,000
x .80x .80
Rp75,000,000 Rp75,000,000
x .80x .80

37. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3737
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)
An entry is needed to eliminate the effects
of income from PT Anak and from PT
Induk’s share of dividends.
Income from
Subsidiary 60,000
Dividends
Declared (60,000(40,000)
Investment in
PT Anak 284,000
(29) 60,000

(29) 32,000
(29) 28,000
)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

38. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3838
Income to
Noncontrolling
Interest
Dividends
Declared (60,000)(40,000) (29) 32,000
Noncontrolling
Interest
An entry is needed to assign the noncontrolling
shareholders their share of income and establish the
20X2 increase in the claim of noncontrolling
shareholders on the net assets of PT Anak.
(30)15,600 (15,600)

(30) 8,000 (60,000)
(30) 7,600
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

39. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-3939
A workpaper entry is needed to eliminate the beginning
stockholders’ equity balances of PT Anak and PT
Induk’s beginning investment balance.
Retained Earnings,
January 1 420,000120,000
Investment in
PT Anak 284,000 (29) 28,000
Common Stock 500,000200,000
Noncontrolling
Interest (30) 7,600
(31)120,000 420,000
(31)256,000
(31)200,000 500,000
(31) 64,000
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated

40. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-4040
PT Induk PT Anak Eliminations
Item Debits Credits
Consolidated
A workpaper entry is needed to eliminate the beginning
inventory profit: Rp3,000,000 x .80 and Rp3,000,000 x
.20.
Cost of Goods
Sold 180,000160,000
Retained Earnings,
January 1 420,000120,000(31) 120,000
Noncontrolling
Interest (30) 7,600
(31) 64,000
(32) 3,000 337,000
(32) 2,400 417,600
(32) 600
71,000
Consolidation Workpaper--20X2Consolidation Workpaper--20X2 (in ‘000) (in ‘000)

41. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-4141
Consolidated Net Income--20X2Consolidated Net Income--20X2
PT Induk’s separate operating income Rp160,000,000
PT Induk’s share of PT Anak’
income:
PT Anak’s net income Rp75,000,000
Realized intercompany profit
on upstream inventory sale 3,000,000
PT Anak’ realized incomeRp78,000,000
PT Induk’s proportionate sharex .80 62,400,000
Consolidated net income, 20X2 Rp222,400,000

42. Irwin/McGraw-Hill ©2001 by The McGraw-Hill Companies, Inc. All rights reserved.
7-7-4242
Chapter SevenChapter Seven
The The
EndEnd