Company A transfers inventory to an affiliate, Company B, for $5,000 with a 25% markup on cost. Company B resells $3,500 of this inventory to nonaffiliates during the same accounting period. What is the cost of goods sold on the intercompany sale

Respuesta :

Answer:

$0

Explanation:

Company A cannot recognize any profit for the sales to an affiliate company, so the cost of goods sold in the transactions carried out by Company B would be Company A's cost of goods sold (price without the markup).

All revenues, profits, cost of goods sold, notes receivables, interests, etc., between affiliated companies must be eliminated from both the income statement and the balance sheet when the consolidated financial statements are being prepared.

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