What is the total amount of pre-tax profit from intercompany inventory sales that was realized during 2019?

Question

Quizplus · Accepted Answer

The intercompany inventory sales for 2019 were $120,000. However, we need to calculate the pre-tax profit. The cost of goods sold for intercompany inventory sales was $80,000. Thus, the pre-tax profit would be calculated by subtracting the cost of goods sold from the sales revenue:

$120,000 - $80,000 = $40,000

Therefore, the pre-tax profit for intercompany inventory sales in 2019 was $40,000 or $22,500 after deducting the intercompany profit elimination entry. Thus, answer choice D, $22,500, is the correct answer.

What Is the Total Amount of Pre-Tax Profit from Intercompany