Question

Brendon, Inc. acquired 100% of Weston Enterprises on January 2, 2020. During 2020, Brendon sold Weston for $700,000 goods which had cost $500,000. Weston still owned 40% of the goods at the end of the year. In 2021, Brendon sold goods with a cost of $500,000 to Weston for $700,000, and the buyer still owned 40% of the goods at year-end. For 2021, cost of goods sold was $1,000,000 for Brendon and $990,000 for Weston. What was consolidated cost of goods sold for 2021?a. $1,370,000b. $1,290,000c. $1,870,000d. $1,990,000

Answer 1

Our answer is B $1,290,000

Step-by-step explanation:

Working:

Cost of Goods Sold (Weston Firm) = 990,000

Cost of Goods Sold (Brendon Firm) = 1,000,000

- Inter Firm Sales from Brendon to Weston = 700,000

+ Unrealized Profit on the Sales from Brendon toWeston = (700000 - 500000)*40% = 80000

- Unrealized Profit on the Sales from Weston to Brendon = (700000 - 500000)*40% = 80000

$1,290,000