Question

Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2020, Skybox sold inventory costing $134,750 to Parkette for $192,500. A total of 16 percent of this inventory was not sold to outsiders until 2021. During 2021, Skybox sold inventory costing $255,000 to Parkette for $340,000. A total of 24 percent of this inventory was not sold to outsiders until 2022. In 2021, Parkette reported cost of goods sold of $445,000 while Skybox reported $272,500. What is the consolidated cost of goods sold in 2021?

Multiple Choice

• $388,660.

• $404,750.

• $728,660.

• $366,340.

Answer 1

Step 1 : Computation of Inter-company profit for 2020

Gross Profit on inter-company sales ($192,500 - $134,750)	$57,750
Inventory not sold till year end	16%
Inter company gross profit for 2020	$9,240

Step 2 : Computation of Inter-company profit for 2021

Gross Profit on inter-company sales ($340,000 - $255,000)	$85,000
Inventory not sold till year end	24%
Inter company gross profit for 2020	$20,400

Step 3 : Computation of consolidated cost of Goods sold 2021

Cost of Goods sold of Parkette	$445,000
Cost of Goods sold of Skybox	$272,500
Inter-company transfer in 2021	($340,000)
Recognize inter-company profit of 2020	($9,240)
Defer inter-company profit of 2021	$20,400
Consolidated cost of goods sold	$388,660

Ans : The consolidated cost of goods sold in 2021 is $388,660