Question

Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2017, Skybox sold inventory costing $241,500 to Parkette for $322,000. A total of 20 percent of this inventory was not sold to outsiders until 2018. During 2018, Skybox sold inventory costing $146,000 to Parkette for $182,500. A total of 27 percent of this inventory was not sold to outsiders until 2019. In 2018, Parkette reported cost of goods sold of $620,000 while Skybox reported $232,500. What is the consolidated cost of goods sold in 2018?

Answer 1

Answer - Consolidated cost of goods sold in 2018 is   $663,755

Explanation -

Intra-Entity Gross Profit, 12/31/17

Intra-entity gross profit ($322,000 – $241,500) $80,500

Inventory remaining at year's end 20%

Intra-entity gross profit, 12/31/17 $16,100

Intra-Entity Gross Profit, 12/31/18

Intra-entity gross profit ($182,500 – $146,000) $36,500

Inventory remaining at year's end 27%

Intra-entity gross profit in inventory, 12/31/18 $9855

Consolidated cost of goods sold

Parent balance $620,000

Subsidiary balance $232,500

Remove intra-entity transfer (182,500)

Recognize 2017 deferred gross profit (16,100)

Defer 2018 intra-entity gross profit    9855

Cost of goods sold $663,755