Company A owns 100% of the common stock of Company B. Total Sales and COGS for...

Company A owns 100% of the common stock of Company B. Total Sales and COGS for both companies are as follows:

	Company A	Company B
Sales	$800,000	$50,000
COGS	$600,000	$36,000
GP	$200,000	$14,000

During the year Company A sold merchandise costing $60,000 to Company B for $80,000. At the end of the year Company B still possessed 30% of this inventory.

Compute consolidated Sales

Compute consolidated COGS

	Company A	Company B
Sales	$800,000	($50,000)

COGS	$600,000	$36,000

Solutions

Expert Solution

Company A Sales = $ 800000
Company B Sales = $ 50,000
Less: Sales of Merchandise to B = ($80000)
for $80000

Consolidated Revenue= $ 770,000

Note: In Consolidated sales Intercorporate sales between Holding and Subsidiary shall be ignored.

COGS of A                                                                         = $ 600,000
COGS of B                                                                         = $ 36,000
Less: Purchase of Goods from Holding Company =($ 80,000)
Add_: Unrealised profit                                                              = $ 24000
__________________________________________________________
Consolidated COGS                                                   = $ 580,000

ekkarill92 answered 1 year ago

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