Gentry Inc.acquired 100% of Gaspard Farms on January 5, 2017.During 2017, Gentry sold Gaspard Farms $625,000 of goods, which had cost $425,000.Gaspard Farms still owned 12% of the goods at the end of the year.In 2018, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 10% of the goods at year-end.For 2018, the cost of goods sold totaled $5,400,000 for Gentry, and $1,200,000 for Gaspard Farms.What was consolidated cost of goods sold for 2018?
A) $6,600,000.
B) $6,604,000.
C) $5,620,000.
D) $5,596,000.
E) $5,625,000.

Question

Quizplus · Accepted Answer

To calculate consolidated cost of goods sold, we need to add up the cost of goods sold for both Gentry and Gaspard Farms, and then subtract the intercompany sales. 
For Gentry: 
Cost of goods sold = $5,400,000
Intercompany sales to Gaspard Farms = $800,000
Therefore, Gentry's net sales to external customers = $5,400,000 - $800,000 = $4,600,000
For Gaspard Farms: 
Cost of goods sold = $1,200,000
Intercompany purchases from Gentry = $1,000,000 (cost of goods sold)
Therefore, Gaspard Farms' net purchases from external suppliers = $1,200,000 - $1,000,000 = $200,000
Now we can calculate the consolidated cost of goods sold: 
Consolidated cost of goods sold = Gentry's cost of goods sold + Gaspard Farms' cost of goods sold - intercompany sales
Consolidated cost of goods sold = $5,400,000 + $1,200,000 - $800,000 = $5,800,000
Therefore, the answer is D, $5,596,000.