Big Company purchased 60 percent ownership of Small Corporation in 20X1. Big purchased the inventory from...
Big Company purchased 60 percent ownership of Small Corporation in 20X1.
Big purchased the inventory from unrelated parties for $42,000
in 20X1.
Big sold that inventory to Small for $60,000 in 20X2.
Small sold 75% of the inventory they purchased from Small to an unaffiliated company for $86,000 on November 10, 20X2. Small still owns the other $15,000 (25%) of that inventory.
The companies had no other transactions during 20X2.
1. What will the consolidated group report as sales revenue for 20X2?
2. What will the consolidated group report as the sub-total gross margin for 20X2? (I want that line item from an income statement, not a %)
Homework Answers
| Big company stake in small corporation | 60% | |
| Stock from unreleated Party | 42000 | |
| Value at which inventory is sold to small corporation | 60000 | |
| Profit Margin | 30% | |
| Stock held by small on 10 novemeber | 15000 | |
| Unrealised Profit | 4500 | |
| 1 | ||
| consolidated group report as sales revenue | ||
| Sales | 146000 | |
| Less intercompany elimination | 60000 | |
| 86000 | ||
| consolidated group report as the sub-total gross margin | ||
| Purchase | 102000 | |
| Less intercompany elimination | 60000 | |
| Less cost of goods sold | 31500 | |
| Closing stock | 10500 | |
| Gross Margin | 54500 | |
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