Question

Alpha Company owns 80 percent of the voting stock of Beta Company. Alpha and Beta reported the following account information from their year-end separate financial records: Alpha Beta Inventory $95,000 $88,000 Sales Revenue 800,000 300,000 Cost of Goods Sold 600,000 180,000 During the current year, Alpha sold inventory to Beta for $100,000. As of year end, Beta had resold only 60 percent of these intra-entity purchases. Alpha sells inventory to Beta at the same markup it uses for all of its customers. What is the total for consolidated inventory

Answer 1

Answer:

$173,000

Explanation:

The computation of the total consolidated inventory is shown below:

But before that following calculations need to be done

Percentage profits that Alpha charge to other customers is

= ($800,000 - $600,000) ÷ $800,000

= 25% of sales

Stock held at year end is

= $100,000 × 40%

= $40,000

Profit involved in stock is

= $40,000 × 25%

= $10,000

Now the stock of beta is  

= $88,000 - $10,000

= $78,000

And finally, the Total for consolidated inventory is

= $95,000 + $78,000

= $173,000