Use the following information to answer the question(s)below.
Pew Corporation acquired 80% ownership of Sordid Incorporated,at a time when Pew's investment cost was equal to 80% of Sordid's book value.At the time of acquisition,the book values and fair values of Sordid's assets and liabilities were equal.Pew uses the equity method.During 2011,Pew sold goods to Sordid for $160,000 making a gross profit percentage of 20%.Half of these goods remained unsold in Sordid's inventory at the end of the year.Income statement information for Pew and Sordid for 2011 were as follows:

-The 2011 consolidated income statement showed cost of goods sold of
A)$500,000.
B)$516,000.
C)$532,000.
D)$660,000.

Question

Use the following information to answer the question(s)below.
Pew Corporation acquired 80% ownership of Sordid Incorporated,at a time when Pew's investment cost was equal to 80% of Sordid's book value.At the time of acquisition,the book values and fair values of Sordid's assets and liabilities were equal.Pew uses the equity method.During 2011,Pew sold goods to Sordid for $160,000 making a gross profit percentage of 20%.Half of these goods remained unsold in Sordid's inventory at the end of the year.Income statement information for Pew and Sordid for 2011 were as follows:
 
-The 2011 consolidated income statement showed cost of goods sold of
A)$500,000. 
B)$516,000. 
C)$532,000. 
D)$660,000.

Quizplus · Accepted Answer

B)
Combined Cost of Goods Sold $660,000
Less: Intercompany Sales (160,000)
Plus: Profit in ending inventory 16,000
Consolidated Cost of Goods Sold $516,000

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