2016 financial statement information for Patricka Corporatio

2016 financial statement information for Patricka Corporation (the parent) and Sydney Company (the subsidiary): Patricka Corp. Sydney Co. Sales $1,500,000 $500,000 Cost of goods sold 675,000 200,000 Gross Profit 825,000 300,000 Operating expenses 550,000 200,000 Net income $ 275,000 $100,000

Inventory 12/31/16 $120,000 $60,000

Patricka owns 90% of Sydney\'s voting common stock.

Patricka sold $250,000 of goods to Sydney. Of the goods Patricka sold to Sydney, $60,000 remained in Sydney\'s inventory on 12/31/16. Patricka has a uniform margin on all of its sales. Sydney has a uniform margin on all of its sales. What amount will show as consolidated cost of goods sold? a. $592,000 b. $875,000 c. $625,000 d. $658,000 Show computations

Solution

consolidated cost of goods sold = Total cost of goods sold of parent company and subsidiary company

consolidated cost of goods sold = 675000+200000 = 875000

Therefore answer is option B