Use the following information for Questions 15 & 16:
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation.In 2013, P sold merchandise that cost $240,000 to S for $300,000.Half of this merchandise remained in S's December 31, 2013 inventory.During 2014, P sold merchandise that cost $375,000 to S for $468,000.Forty percent of this merchandise inventory remained in S's December 31, 2014 inventory.Selected income statement information for the two affiliates for the year 2014 is as follows:
-Consolidated cost of goods sold for P Company and Subsidiary for 2014 are:
A)$2,260,500.
B)$2,268,000.
C)$2,276,700.
D)$2,737,500.

Question

Use the following information for Questions 15 & 16:
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation.In 2013, P sold merchandise that cost $240,000 to S for $300,000.Half of this merchandise remained in S's December 31, 2013 inventory.During 2014, P sold merchandise that cost $375,000 to S for $468,000.Forty percent of this merchandise inventory remained in S's December 31, 2014 inventory.Selected income statement information for the two affiliates for the year 2014 is as follows: 
-Consolidated cost of goods sold for P Company and Subsidiary for 2014 are:
A)$2,260,500. 
B)$2,268,000. 
C)$2,276,700. 
D)$2,737,500.

Quizplus · Accepted Answer

The consolidated cost of goods sold for 2014 is computed as follows:
Cost of goods sold = [($375,000 × 0.6) + ($240,000 × 0.5) + ($375,000 × 0.4)] = $225,000 + $120,000 + $150,000 = $495,000
Consolidated cost of goods sold = $2,276,700 ($468,000 + $2,406,700 − $300,000 − $495,000)

Use the Following Information for Questions 15 & 16