Elbonia Corporation,a 100 percent subsidiary of Atomic Corporation,caters to its parent's entire inventory requirements.In 2007,Elbonia produced inventory at a cost of $36,000 and sold it to Atomic for $75,000.Atomic held all the items in inventory on January 1,2008.During 2008,Atomic sold all the units for $98,000.Assume that the companies had no other transactions during 2007 and 2008.
-Based on the preceding information,what amount would be reported in the consolidated financial statements for cost of goods sold for 2007?
A)$39,000
B)$36,000
C)$75,000
D)$0

Question

Quizplus · Accepted Answer

In consolidated financial statements, intercompany transactions are eliminated. Since Elbonia is a 100% subsidiary of Atomic, the $75,000 sale to Atomic is eliminated, and only the original production cost of $36,000 is considered. However, since the inventory was not sold to an external party in 2007, the cost of goods sold for 2007 is $0.

Elbonia Corporation,a 100 Percent Subsidiary of Atomic Corporation,caters to Its