Pot Co. holds 90% of the common stock of Skillet Co. During 2018, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no intra-entity transfers from Skillet to Pot. Intra-entity transfers had the same markup as sales to outsiders. Skillet still held 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018. What are consolidated sales and cost of goods sold, respectively for 2018

Question

Business

Payton Sharp

19 February, 17:42

Pot Co. holds 90% of the common stock of Skillet Co. During 2018, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no intra-entity transfers from Skillet to Pot. Intra-entity transfers had the same markup as sales to outsiders. Skillet still held 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018. What are consolidated sales and cost of goods sold, respectively for 2018

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Anya · Answer 1

Consolidated sales $1,400,000

Consolidated cost of goods sold $966,000

Explanation:

The consolidated sales and cost of sales of the Pot Group shall be determined through the following mentioned method:

Pot Co Skillet Co Consolidated Figures

Sales $1,120,000 $420,000 $1,540,000

Less:Intra group sales ($140,000)

Consolidated sales $1,400,000

Cost of sales $840,000 $252,000 $1,092,000

Less:Intra group cost of sales ($140,000)

Add:Unrealized profit on intra group sales $14,000

(140,000*40%*25%)

Consolidated cost of goods sold $966,000