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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 Entry TI Entry G Consolidated
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 2 years ago
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