Question

In: Accounting

Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods...

Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods to Mullen for $2,500,000 that cost Poole $1,850,000. Mullen still owned 30% of the goods at the end of the year. Cost of goods sold was $11,200,000 for Poole and $6,600,000 for Mullen. What was consolidated cost of goods sold?

Multiple Choice

  • $15,105,000.

  • $15,300,000.

  • $15,495,000.

  • $17,800,000.

Solutions

Expert Solution

Cost of goods sold of Poole = $11200000
Cost of goods sold of Mullen = $6600000
Value of goods sold by Poole to third party = $11200000 - $1850000
             = $9350000
Markup on sales from transfer from Poole to Mullen = ($2500000-$1850000)/$2500000
                                 = 26%
Stock transfer from Poole included in Cost of goods sold of Mullen = $2500000*70%
        = $1750000
Cost of goods sold of Mullen excluding goods transferred from Poole = $6600000-$1750000
             = $4850000
Cost of goods transferred from Poole included in Mullen's cost of goods sold = $1750000-($1750000*26%)
                             = $1295000
Therefore,
Total consolidated cost of goods sold = A+D+E
= $9350000+$4850000+$1295000
= $15495000
Therefore 3rd option is the correct answer.

ekkarill92 answered 2 years ago
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