Question

Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2017, Skybox sold inventory costing $149,600 to Parkette for $187,000. A total of 15 percent of this inventory was not sold to outsiders until 2018. During 2018, Skybox sold inventory costing $208,250 to Parkette for $245,000. A total of 30 percent of this inventory was not sold to outsiders until 2019. In 2018, Parkette reported cost of goods sold of $582,500 while Skybox reported $352,500. What is the consolidated cost of goods sold in 2018?

Answer 1

Answer
Calculation of Consolidated cost of goods sold
Parent balance	$      582,500
+ Subsidiary balance	$      352,500
- Intra-entity transfers	$      245,000
- Beginning unrealized gross profit	$          5,610
+ Ending unrealized gross profit	$        11,025
Consolidated cost of goods sold	$      695,415
Beginning unrealized gross profit	$          5,610
(15% x $187000) x [($187000 - $149600)/$187,000]
Ending unrealized gross profit	$        11,025
(30% x $245,000) x [($245000 - $208250)/$245000]