Question

Top Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports sales of $800,000 and cost of goods sold of $600,000. For this same period, Bottom has sales of $300,000 and cost of goods sold of $180,000. During the current year, Bottom sold merchandise to Top for $100,000. The parent still possesses 40 percent of this inventory at the current year-end. Bottom had established the transfer price based on its normal gross profit rate. What are the consolidated sales and cost of goods sold?

Answer 1

Answer:

690,000

Step-by-step explanation:

given,                        

sale of the company = $800,000              

cost of the good sold = $600,000            

percentage = \dfrac{800000-600000}{800000}

                   = 25%                          

unrealized gross profit = $100000

                        = ( $100000× 0.40 ) × 0.25

                        = $ 10,000                  

consolidated Sales = 800000 + 300,000 - 100000

                                = $ 1,000,000                    

Consolidated COGS = $600,000 + $180,000 - 100,000 + 10,000

                                  = 690,000