Use the following information to answer the question(s)below.
Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value.At the time of purchase,the book value and fair value of Spillway's net assets were equal.The two companies report the following information for 2011 and 2012.
During 2011,one company sold inventory to the other company for $50,000 which cost the transferor $40,000.As of the end of 2011,30% of the inventory was unsold.In 2012,the remaining inventory was resold outside the consolidated entity.

-If the intercompany sale was an upstream sale,the total amount of consolidated cost of goods sold for 2012 will be
A)$300,000.
B)$430,000.
C)$470,000.
D)$477,000.

Question

Use the following information to answer the question(s)below.
Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value.At the time of purchase,the book value and fair value of Spillway's net assets were equal.The two companies report the following information for 2011 and 2012.
During 2011,one company sold inventory to the other company for $50,000 which cost the transferor $40,000.As of the end of 2011,30% of the inventory was unsold.In 2012,the remaining inventory was resold outside the consolidated entity.
 
-If the intercompany sale was an upstream sale,the total amount of consolidated cost of goods sold for 2012 will be
A)$300,000. 
B)$430,000. 
C)$470,000. 
D)$477,000.

Quizplus · Accepted Answer

D)
Combined cost of goods sold $480,000
Less: Unrealized profit in the
2012 beginning inventory (3,000)
Consolidated cost of sales $477,000

Use the Following Information to Answer the Question(s)below