Question

Alpha Company owns 80 percent of the voting stock of Beta Company. Alpha and Beta reported the following account information from their year-end separate financial records:

	Alpha	Beta
Inventory	$95,000	$88,000
Sales Revenue	800,000	300,000
Cost of Goods Sold	600,000	180,000

During the current year, Alpha sold inventory to Beta for $100,000. As of year end, Beta had resold only 60 percent of these intra-entity purchases. Alpha sells inventory to Beta at the same markup it uses for all of its customers.

Problem 5-4 (Static) (LO 5-2, 5-3)

What is the total for consolidated sales revenue?

Multiple Choice

• $1,100,000

• $970,000

• $1,000,000

• $800,000

Answer 1

Solution:-

In this particular question we are asked to cxalculate the value of Consolidated sales revenue .

Now, here we can see that sales revenue of Alpha of $ 800,000 includes $100,000 which was sold to itra group .

So, the effective sales revenue for consolidation purposes of Alpha = $ (800,000 - 100,000 )

= $ 700,000

Ans the sales revenue of Beta for the consolidation purposes = $ 300,000

Hence the value of consolidated sales revenue = $ ( 700,000 + 300,000 ) = $ 1,000,000

So, the option no ( c ) with an amount of $ 1,000,000 is the correct answer.