Included in the amounts for Skillet's sales were intra-entity gross profits related to Skillet's intra-entity transfer of merchandise to Pot for $140,000.There were no intra-entity transfers from Pot to Skillet.Intra-entity transfers had the same markup as sales to outsiders.Pot still had 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018.What are consolidated sales and cost of goods sold for 2018?
A) $1,400,000 and $ 952,000.
B) $1,400,000 and $ 966,000.
C) $1,540,000 and $1,078,000.
D) $1,400,000 and $ 974,400.
E) $1,540,000 and $1,092,000.

Question

Quizplus · Accepted Answer

Consolidated sales will be the total amount of sales made by Skillet and the intra-entity gross profit related to Skillet's intra-entity transfer to Pot.
Consolidated sales = Skillet's sales + Intra-entity gross profit = $1,200,000 + $140,000 = $1,340,000

Cost of goods sold will be the sum of cost of goods sold for Skillet and the cost of intra-entity transfers from Skillet to Pot.
Cost of goods sold = Skillet's cost of goods sold + cost of intra-entity transfers
= ($840,000 + $140,000) + ($840,000 x 60%)
= $980,000 + $504,000
= $1,484,000

Therefore, the consolidated sales and cost of goods sold for 2018 are $1,340,000 and $1,484,000 respectively. The answer is option D.

Included in the Amounts for Skillet's Sales Were Intra-Entity Gross