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 2008?
A)$0
B)$39,000
C)$36,000
D)$98,000

Question

Quizplus · Accepted Answer

Since Elbonia produced the inventory at a cost of $36,000, that is the cost that should be reported in the consolidated financial statements for cost of goods sold. The fact that Atomic sold the units for a higher price does not affect the cost of goods sold calculation. Therefore, the correct answer is C) $36,000.

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