Jubilee, Inc., owns 35 percent of JPW Company and applies the equity method. During the current year, Jubilee buys inventory costing $60,000 and then sells it to JPW for $75,000. At the end of the year, JPW still holds only $30,000 of merchandise, What amount of gross profit must Jubilee defer in reporting this investment using the equity method
Solved
Show answers
More tips
- D Dating, Love, Relationships How Long Can Love Last?...
- A Auto and Moto Mastering One-Movement Parking: All You Need to Know...
- C Computers and Internet How to Properly Order Clothing from International Online Stores...
- H Health and Medicine Headache: A Comprehensive Guide to Treatment...
- F Family and Home How to Choose the Best Diapers for Your Baby?...
- A Auto and Moto Discovering the Leader: What is the Most Expensive Car in the World?...
- F Food and Cooking How to Quickly Put your Child to Sleep?...
- C Computers and Internet How to Create a Website for Free and Easy?...
- F Family and Home Parquet or laminate, which is better?...
- H Health and Medicine Coughing: Causes, Types, and Treatment Methods...
Answers on questions: Business
- B Biology I need answer asap plz...
- S Social Studies About how many different insects are known? hundreds several thousand millions more than 100 thousand...
- G Geography Do you think that the continents will ever rejoin to form another supercontinent like Pangaea? yes or no?...
- M Mathematics Can someone please explain how I apply SOHCAHTOA properly to this?...
Ответ:
The amount of gross profit which Jubilee must defer in reporting this investment is equal to $2,100.
Explanation:
This can be calculated as follows:
Gross profit on sale = Sales - Cost of sales = $75,000 - $60,000 = $15,000
Gross profit margin = Gross profit on sale / Sales = $15,000 / $75,000 = 0.20, or 20%
Gross margin on ending inventory = Ending inventory * Gross profit margin = $30,000 * 20% = $6,000
Share of gross profit of Jubilee, Inc. in ending inventory = Gross margin on ending inventory * Share of Jubilee, Inc. in JPW Company = $6,000 * 35% = $2,100
Therefore, the amount of gross profit which Jubilee must defer in reporting this investment is equal to its share of gross profit in ending inventory which is $2,100.
Ответ: