Final answer:
The correct answer is that the consolidated financial statements will report the merchandise at its original cost of $400,000. The ending inventory held by the parent should be reported at the original cost, which excludes the intercompany markup.
Step-by-step explanation:
When preparing consolidated financial statements, transactions between a parent company and its subsidiary must be eliminated to avoid double counting. In this case, the subsidiary's markup of 25% on cost has led to an intercompany sale of $500,000 to the parent. However, these sales should not be reflected in the consolidated totals. The ending inventory that the parent holds should be reported at its original cost to the consolidated entity - not at the inflated price paid due to intercompany markup.
Therefore, the correct statement concerning the information reported on the 2013 consolidated financial statements is that the ending inventory will be reported at its original cost before the markup, which is less than the parent's cost of $500,000. It can be calculated by dividing the parent's cost by 1 plus the markup percentage (in this case, 1.25), which equals $400,000 ($500,000 / 1.25). Thus, the $100,000 of inventory not yet sold by the parent is part of this $400,000 original cost. The remaining $300,000 worth of merchandise that was sold should also be adjusted back to the original cost, but this has already been done through sales to outside customers. As a result, option d is correct: The consolidated financial statements will report the merchandise at its original cost of $400,000.