Large Company owns 80 per cent of the issued capital of Smaller Company and Large Company owns 60 per cent of the issued capital of Medium Company.The three companies form an economic entity for the purposes of consolidated accounts.During the period Smaller Company sold inventory to Medium for $400,000.Medium sold the same inventory to Large for $560,000 and Large sold it to an entity external to the group for $760,000.What are the sales revenue reported in the consolidated statements for this item?
A) $1,416,000
B) $1,720,000
C) $760,000
D) $400,000
E) None of the given answers.

Question

Quizplus · Accepted Answer

In consolidated financial statements, only sales to external parties are reported as revenue. Therefore, the sales revenue reported is $760,000, which is the amount for which Large Company sold the inventory to an external entity.

Large Company Owns 80 Per Cent of the Issued Capital