Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.
Include in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet had resold all of the intra-entity purchase from Pot to outside parties during 2011. What are consolidated sales and cost of goods sold for 2011?

Question

Quizplus · Accepted Answer

Consolidated sales are calculated by adding Pot's sales ($1,120,000) and Skillet's sales ($420,000) and then subtracting the intra-entity sales ($140,000), resulting in $1,400,000. Consolidated cost of goods sold is calculated by adding Pot's cost of goods sold ($840,000) and Skillet's cost of goods sold ($252,000), resulting in $1,092,000. However, since Skillet resold all intra-entity purchases, no further adjustments are needed, confirming the consolidated cost of goods sold as $952,000.

Pot Co Holds 90% of the Common Stock of Skillet Co