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A parent sells merchandise to its subsidiary at a markup of 20% on cost. In the current year, the subsidiary had $120,000 in merchandise purchased from the parent in its beginning inventory. During the current year, the subsidiary paid the parent $720,000 for merchandise, and sold merchandise purchased from the parent to outside customers for $870,000. At year-end, the subsidiary has $180,000 in merchandise purchased from the parent in its ending inventory.
-What is consolidated sales revenue for the year?

Question

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A parent sells merchandise to its subsidiary at a markup of 20% on cost. In the current year, the subsidiary had $120,000 in merchandise purchased from the parent in its beginning inventory. During the current year, the subsidiary paid the parent $720,000 for merchandise, and sold merchandise purchased from the parent to outside customers for $870,000. At year-end, the subsidiary has $180,000 in merchandise purchased from the parent in its ending inventory.
-What is consolidated sales revenue for the year?

Quizplus · Accepted Answer

Consolidated sales revenue for the year includes only the sales made to outside customers, not the internal sales between the parent and subsidiary. Therefore, the consolidated sales revenue is $870,000, which is the amount the subsidiary sold to outside customers.

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