Question

"Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2017, Skybox sold inventory costing $160,000 to Parkette for $200,000. A total of 18 percent of this inventory was not sold to outsiders until 2018. During 2018, Skybox sold inventory costing $297,500 to Parkette for $350,000. A total of 30 percent of this inventory was not sold to outsiders until 2019. In 2018, Parkette reported cost of goods sold of $607,500 while Skybox reported $450,000. What is the consolidated cost of goods sold in 2018?"

Answer 1

Answer:

$716,050

Explanation:

The computation of consolidated cost of goods sold is shown below :-

Unrealized gross profit of Beginning

= ($200,000 × 18%) × ($200,000 - $160,000 ÷ $200,000) × 100%

= $36,000 × 20%

= $7,200

Unrealized gross profit of  of ending

= ($350,000 × 30%) × ($350,000 - $297,500 ÷ $350,000) × 100%

= $105,000 × 15%

= $15,750

Therefore the consolidated cost of goods sold in 2018

= $607,000 + $450,000 - $350,000 + $15,750

= $716,050