K Company owns 100% of E Company. During the year, Kiana purchased inventory from Elyssa at a mark-up of 20% based on cost. How should the group compute for consolidated cost of sales? a. Cost of Sales of K + Cost of Sales of E– intercompany sales + Realized profit in beginning inventory – Unrealized profit in ending inventory. b. Cost of Sales of K + Cost of Sales of E – intercompany sales – Realized profit in beginning inventory + Unrealized profit in ending inventory. c. Cost of Sales of Kiana + Cost of Sales of Elyssa – Intercompany sales d. Cost of Sales of K + Cost of Sales of E

K Company owns 100% of E Company. During the year, Kiana purchased inventory from Elyssa at a mark-up of 20% based on cost. How should the group compute for consolidated cost of sales? a. Cost of Sales of K + Cost of Sales of E– intercompany sales + Realized profit in beginning inventory – Unrealized profit in ending inventory. b. Cost of Sales of K + Cost of Sales of E – intercompany sales – Realized profit in beginning inventory + Unrealized profit in ending inventory. c. Cost of Sales of Kiana + Cost of Sales of Elyssa – Intercompany sales d. Cost of Sales of K + Cost of Sales of E

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 18PC

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During 20x9, PP Corporation recorded sales of inventory costing P500,0000 to SS Company, its wholly owned subsidiary, on the same terms as sales made to third parties. At December 31,20x9, SS held one-fifth of this goods inventory. The following information pertains to PP and SS’s sales for 20x9: (see image below) In its 20x9 consolidated income statement, what amount should PP report as cost of sales?
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, Top sold merchandise to Bottom for $100,000. The subsidiary still possesses 40 percent of this inventory at the current year-end. Top had established the transfer price based on its normal gross profit rate. What are the consolidated sales and cost of goods sold?a. $1,000,000 and $690,000b. $1,000,000 and $705,000c. $1,000,000 and $740,000d. $970,000 and $696,000
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