Question

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1781 LPP Strico acquired 100% of Block, Inc. on Jan 1 2011, Stripe sold goods t o the 6 0 0 Black still owned 30% of the goods at year end. Cost of goods sold was $500 and $2.500.000 for Block. What was the consolidated one and a posto for 100.000 of pod solid was 55,700.000 Cleveland Corp. owned all of the voting common stock of Columbus Co. During 2010, Clevelandmade cash sales of $500,000 to Columbus. The gross profit rate was 40%. At the end of the year, Columbus had 20% of the goods still on hand. Prepare the consolidation entries that should be made at the end of 2010.

Answer 1

Requirement 1: Compute consolidated cost of goods sold as follows

Particulars	Amount
Cost of goods sold - Parent	$5,700,000
Add: Cost of goods sold - Subsidiary	$2,500,000
Add: Deferred unrealized gross profit	$48,000
Deduct: Total intra-entity transfer	($800,000)
Consolidated cost of goods sold	$7,448,000

Notes: Compute deferred unrealized gross profit as follows

Particulars	Amount
Sale value	$800,000
Cost of goods sold	$640,000
Gross profit	$160,000
Percentage of inventory remained	30%
Deferred unrealized gross profit	$48,000

Requirement 2: Prepare the following consolidation entries

Item	Account Title and Explanation	Debit	Credit
Entry TI	Sales	$500,000
	Cost of Goods sold		$500,000
	To eliminate the effect of intra-entity inventory transfer
Entry G	Cost of Goods Sold ($500,000 × 40% × 20%)	$40,000
	Inventory		$40,000
	To eliminate unrealized gross profit