Choco Company owns 70% of the common stock of Allie, Inc. In the current year, C

Question

Choco Company owns 70% of the common stock of Allie, Inc. In the current year, Choco reports sales of $12,000,000 and cost of goods sold of $9,600,000. For the same period, Allie has sales of $560,000 and cost of goods sold of $360,000. During the year, Choco sold merchandise to Allie for $80,000 at a price based on the normal markup. At the end of the year, Allie still possesses 40 percent of this inventory.

a. Compute consolidated sales.

b. Compute the gross profit rate

c. Compute consolidated cost of goods sold.

Explanation / Answer

Choco Company Allie Total Elimination Net Sales 12000000 560000 12560000 -80000 12480000 Cost of goods sold 9600000 360000 9960000 -51432 9908568 Gross Profit 2400000 200000 2600000 -28568 2571432 Gross Profit % 20 35.71 20.70 20.60 Cost of goods sold % 80 64.29 79.30 a) Consolidated sales 12480000 Gross profit rate 20.60 Consolidated cost of goods sold 2571432

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