Pot Co. holds 90% of the common stock of Skillet Co. During 2013, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.
Included in the amounts for Pot's sales were Pot's sales for merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet had resold all of the intra-entity purchases from Pot to outside parties during 2013. What are consolidated sales and cost of goods sold for 2013?
A) $1,400,000 and $952,000.
B) $1,400,000 and $1,092,000.
C) $1,540,000 and $952,000.
D) $1,400,000 and $1,232,000.
E) $1,540,000 and $1,092,000.

Question

Quizplus · Accepted Answer

Consolidated Sales = Parent's Sales $1,120,000 + Sub's sales $420,000 = $1,540,000 - Intra-Entity Sales $140,000 = $1,400,000Consolidated COGS = Parents COGS $840,000 + Sub's COGS $252,000 - Total Intra-Entity Transfer $140,000 = $952,000

Pot Co Holds 90% of the Common Stock of Skillet Co