Final answer:
To calculate the consolidated cost of goods sold, we must first calculate the carrying amount at the time of sale, then determine the intra-group profit, and subsequently calculate the correct depreciation from a consolidated perspective. The total consolidated cost of goods sold would be $368,000 over the remaining 8-year life of the building, which is not one of the provided answer choices.
Step-by-step explanation:
The question asks for the calculation of consolidated cost of goods sold after Thomson Corporation sold a building to its subsidiary, Stayer, Incorporated. To answer this question, we first need to calculate the annual depreciation expense and then determine the effect of the intra-group sale on consolidated financial statements.
Thomson acquired the building for $460,000 with a 10-year life. The annual depreciation expense is $460,000 / 10 years = $46,000.
By January 1, 2018, the building would have been depreciated for 2 years, amounting to a total depreciation of $46,000 x 2 years = $92,000. The carrying amount of the building on January 1, 2018, is, therefore, $460,000 - $92,000 = $368,000. Thomson sold the building to Stayer for $430,400. This results in an intra-group profit of $430,400 - $368,000 = $62,400.
Since the remaining useful life of the building is 8 years at the point of sale, Stayer will depreciate the building at the rate of $430,400 / 8 years = $53,800 per year. However, for consolidated financial statements, the intra-group profit must be eliminated.
The exaggerated depreciation expense is the $62,400 profit spread over the remaining life of 8 years. Thus, the annual exaggerated depreciation is $62,400 / 8 years = $7,800. The correct annual depreciation from a consolidated perspective should be $53,800 (new depreciation) - $7,800 (exaggerated portion) = $46,000. Since the consolidated cost of goods sold will only include the correct depreciation expense, over the 8 years, the total is $46,000 x 8 years = $368,000.
In summary, the consolidated cost of goods sold is not directly provided as one of the multiple-choice options, but the correct calculation leads to an answer of $368,000, which would be the total depreciation expense recognized for the building over its remaining life after the intra-group sale.