On January 1,20X8,Parent Company acquired 90 percent ownership of Subsidiary Corporation,at underlying book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation.On Mar 17,20X8,Subsidiary purchased inventory from Parent for $90,000.Subsidiary sold the entire inventory to an unaffiliated company for $120,000 on November 21,20X8.Parent had produced the inventory sold to Subsidiary for $62,000.The companies had no other transactions during 20X8.
-Based on the information given above,what amount of cost of goods sold will be reported in the 20X8 consolidated income statement?

Question

Quizplus · Accepted Answer

The cost of goods sold in the consolidated income statement will reflect the original cost of the inventory to the parent company, which is $62,000. This is because intercompany transactions, such as the sale of inventory from Parent to Subsidiary, are eliminated in consolidation. The sale to the unaffiliated company is the only transaction that affects the consolidated financial statements, and the cost associated with that sale is the original production cost of $62,000.

On January 1,20X8,Parent Company Acquired 90 Percent Ownership of Subsidiary