Parent Co. acquired 100% of Sub, Inc. on January 1,2013. During 2013, Parent sol
ID: 2415075 • Letter: P
Question
Parent Co. acquired 100% of Sub, Inc. on January 1,2013. During 2013, Parent sold goods to Sub for $480,000 that cost Parent $360,000. Sub still owned 40% of the goods at the end of the year. Cost of goods sold was $2,160,000 for Parent and $1,280,000 for Sub. Required: Prepare all consolidation entries related to inventory and cost of goods sold for 2013. Compute consolidated cost of goods sold for 2013. Assuming that the remainder of the inventory was sold to third parties during 2014, prepare the 2014 consolidation entry to recognize the previously deferred profit.Explanation / Answer
Profit on sale goods=$480,000-$360,000=$120,000
40% above goods are not sold at end of the year
so Un earned profit=$120,000*40%=$48,000
so
a) Consolidated profit and loss account $48,000
Inventory $48,000
b) consolidated Cost of goods sold=$2,160,000+$1,280,000+$48,000=$3,488,000
c)
Inventory $48,000
Consoldated profit & loss account $48,000
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