Question

During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary. The subsidiary also makes sales of inventory at a profit to its parent during the same year. Both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another. Consolidated revenues for the year should exclude:________.
a) 80 percent of the total revenues from intercompany sales.
b) only the revenues from the subsidiary's intercompany sales.
c) only the revenues from the parent's intercompany sales.
d) total revenues from intercompany sales. A

Answer 1

Answer: total revenues from intercompany sales.

Explanation:

From the question, we are informed that during the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary and that the subsidiary also makes sales of inventory at a profit to its parent during the same year.

We are further told that both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another.

In this case, the consolidated revenues for the year should exclude total revenues from intercompany sales