1. During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub...

1. During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub sold all but 10,000 of the inventory purchased from Parent for 70,000 to external entities. What is the unrealized gross profit?

2.During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub sold all but 10,000 of the inventory purchased from Parent for 70,000 to external entities. What is the gross profit percent?

3.During 2012, Parent sold inventory originally costing 60,000 to its 100% Sub for 75,000. Sub sold all but 10,000 of the inventory purchased from Parent for 70,000 to external entities. What is the cost of goods sold for the inventory sold to external entities?

The answers are 2000, 20%, 52000, can you help me with the steps in detail?

Solutions

Expert Solution

1. What is the unrealized gross profit?
Selling price of Parent entity	75000
Cost to Parent entity	60000
Gross Profit (75000 - 60000)	15000
Inventory unsold by the Subsidiary	10000
Percentage of inventory unsold [(10000/75000)*100]	13.33%
*Unrealized Gross Profit (1500013.3333%)**	2000

2. What is the gross profit percent?
Selling price of Parent entity	75000
Cost to Parent entity	60000
Gross Profit (75000 - 60000)	15000
Percentage of Gross Profit [(15000/75000)*100]	20%

3. What is the cost of goods sold for the inventory sold to external entities?
Total Cost of Inventory to subsidiary	75000
Less: Inventory unsold (Closing stock) at Subsidiary	10000
Cost of inventory sold by subsidiary (75000 - 10000)	65000
Percentage of Gross Profit [(15000/75000)*100]	20%
Cost of Goods sold percentage will be (100%-20%)	80%
Cost of goods sold for the inventory sold to external entities (65000*80%)	52000

ekkarill92 answered 1 year ago

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