question archive ABC Corporation owns 75 percent of XYZ Company's voting shares
ABC Corporation owns 75 percent of XYZ Company's voting shares
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ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 for $130 each. Both companies use perpetual inventory systems.
1.
Required information
Based on the information given above, what amount of cost of goods sold did ABC record in 20X8?
$2,765,000
$1,620,000
$1,422,000
$2,963,000
2.
Required information
Based on the information given above, what amount of cost of goods sold did XYZ record in 20X8?
$2,765,000
$1,620,000
$1,422,000
$2,963,000
3.
Required information
Based on the information given above, what amount of cost of goods sold must be reported in the consolidated income statement for 20X8?
$2,765,000
$1,620,000
$1,422,000
$2,963,000
4.
Required information
Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8?
$2,765,000
$1,620,000
$1,422,000
$2,963,000
5.
Required information
Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X9?
$187,000
$221,000
$1,422,000
$2,963,000
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Answer:
1.
Cost of goods sold for ABC = 35,000*$79 = $2,765,000
Hence option $2,765,000 is correct.
2.
Cost of goods sold for XYZ = 18,000*$90 = $1,620,000
Hence option $1,620,000 is correct.
3.
Cost of goods sold to be reported in consolidated income statement = 18,000*$79 = $1,422,000
Hence option $1,422,000 is correct.
4.
Cost of goods sold to be eliminated from consolidated income statement = 35,000*$79 + 18,000*$11 ($90-79) = $2,963,000
5.
Cost of goods sold to be eliminated from consolidated income statement for 20X9 = 17,000 (35,000-18,000) * $11 = $187,000
Hence option $187,000 .
