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Stowe Company owns 80% of Teton Company. At the end of the most recent year, Stowe...

Stowe Company owns 80% of Teton Company. At the end of the most recent year, Stowe reported inventory of 500,000, and Teton reported inventory of 180,000. During the year, Stowe sold merchandise costing $150, 000 to Teton for $250,000. By the end of the year Teton sill possessed 40% of the merchandise. What is the amount of the consolidated inventory?

a. $640,000

b.$680,000

c.$644,000

d.$720,000

$630,000

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Answer #1

The correct answer is $640000

Explanation and calculations

Teton has purchased inventory from stowe of $250000 of which 40%, that is $100000 (250000×40%) is yet held by teton in closing inventory

That closing inventory includes unrealised profit that need to be eliminated

Percentage of profit =((250000-150000)÷250000)×100

=40 %

The consolidated inventory

= stowe inventory + teton inventory - unrealised profit

= 500000+180000-(100000×40%)

= $640000

Thus the correct answer is $640000

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