Question

	Pollman (parent)	Shells (Subsidiary)
Sale s	$1,500,000	$500,000
Cost of Goods Sold	750,000	200,000
Operating Expenses	550,000	200,000
Net Income	$200,000 =======	$100,000 =======
Inventory 12/31/X1	$120,000	$60,000

Pollman owns 80% of Shells’ common stocks.

Pollman sold $200,000 of goods to Shells.

Of the goods sold $60,000 were not sold on 12/31/X1.

Pollman has a uniform margin on all of its sales.

Shells has a uniform margin on all of its sales

What amount will be reported as consolidated cost of goods sold?

Answer 1

Particulars	Sales	COGS	Gross profit	%
Pollman	1,500,000	(750,000)	750,000.00	50%
Shells	500,000	(200,000)	300,000.00	60%
Particulars	COGS
Pollman	750,000
Shells	200,000
Total	950,000
Less: intercompany sales related COGS	(100,000)	=-200000*50%
Less: markup on goods subsequently sold by shells bought from pollman	(84,000)	=-140000*60%
Total	766,000

Answer is:

766,000

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