Question

Selected information from the separate and consolidated balance sheets and income statements of Pard, Inc. and its subsidiary, Spin Co., as of December 31, year 1, and for the year then ended is as follows:

	Pard	Spin	Consolidated
Balance sheet accounts
Accounts receivable	$ 26,000	$ 19,000	$ 39,000
Inventory	30,000	25,000	52,000
Investment in Spin	67,000	--	--
Goodwill	--	--	30,000
Noncontrolling interest	--	--	10,000
Stockholders' equity	154,000	50,000	154,000
Income statement accounts
Revenues	$200,000	$140,000	$308,000
Cost of goods sold	150,000	110,000	231,000
Gross profit	50,000	30,000	77,000
Equity in earnings of Spin	20,000	--	--
Net income	36,000	20,000	40,000

Additional information

1)	During year 1, Pard sold goods to Spin at the same markup on cost that Pard uses for all sales. At December 31, year 1, Spin had not paid for all of these goods and still held 37.5% of them in inventory.
2)	Pard acquired its interest in Spin on January 2, year 1.

In Pard's consolidated balance sheet, what was the carrying amount of the inventory that Spin purchased from Pard?

The answer is $9,000.

I don't understand why the intercompany sales to spin is $32,000.

Please show work for me.

Thank you so much for your help!

Answer 1

Pard Individual sales	$    200,000.00
Spin Individual sales	$    140,000.00
Total Sales	$    340,000.00
Consolidated Sales	$    308,000.00
Intercompany Sales	$      32,000.00
Amount of the inventory that Spin is carrying in his book = $32000 x 37.5%	$      12,000.00
Pard's Cost of sales  = 150,000/200,000	75%
Carrying amount of the inventory that Spin purchased from Pard = 12000 x 75%	$        9,000.00