Question

Pepper Corporation owns 75 percent of Salt Company's voting shares. During 20X8, Pepper produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to Salt for $90 each. Salt sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8

Answer 1

Answer:

Please see below

Explanation:

Given that:

Number of chairs sold = 35,000

Cost per chair $79

The cost of goods sold that must be eliminated from the consolidated

= Number of chairs sold × Cost per chair

= 35,000 × $90

= $2,765,000

Therefore, for computing the cost of goods sold to be eliminated, we simply multiply the number of chairs sold with cost per chair.