Answer:
Amount to be reported as cost of goods sold in the consolidated financial statement = $900,000
Explanation:
When a company holds 100% shares or more than 50% shares of another company that is common stock, they establish a holding subsidiary relationship in which equity method is to be followed.
As per equity method all the cost of goods sold by that of subsidiary is to be added to financial statements of holding while making consolidated financial statements.
In this if there are any sales or purchase between holding and subsidiary then such profit is not be added up till that inventory is further sold to third party.
In case the inventory is sold to third party then entire profit that is inclusive of holding to subsidiary is to be included as part of consolidated financial statements.
Therefore in the above case since Daisy has sold the inventory purchased from Tulip, entire cost of goods sold shall form part of consolidated financial statements.
Here amount to be reported as cost of goods sold in the consolidated financial statement = $600,000 + $400,000 = $1,000,000
Further the cost of goods sold is included 2 times, first in Tulip's account for $60,000 and then the same in Daisy's account for $100,000. In consolidated statement double amount should not be added, thus net cost of goods sold = $1,000,000 - $100,000 = $900,000
