Question

Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2017, Skybox sold inventory costing $210,600 to Parkette for $270,000. A total of 20 percent of this inventory was not sold to outsiders until 2018. During 2018, Skybox sold inventory costing $163,510 to Parkette for $197,000. A total of 30 percent of this inventory was not sold to outsiders until 2019. In 2018, Parkette reported cost of goods sold of $537,500 while Skybox reported $437,500. What is the consolidated cost of goods sold in 2018?

• $776,167.

• $973,167.

• $752,090.

• $779,833.

Answer 1

Answer
The Correct Option is A : $776,167
Explanation
Calculation of Consolidated cost of goods sold
Parent balance	$      537,500
+ Subsidiary balance	$      437,500
- Intra-entity transfers	$      197,000
- Beginning unrealized gross profit	$        11,880
+ Ending unrealized gross profit	$        10,047
Consolidated cost of goods sold	$      776,167
Beginning unrealized gross profit	$        11,880
(20% x $270,000) x [($270,000 - $210,600)/$270,000]
Ending unrealized gross profit	$        10,047
(30% x $197000) x [($197000 - $163510)/$197000]