Question

Gentry Inc. purchased 90% of Gaspard Farms on January 5, 2019. During 2019, Gentry sold Gaspard Farms for $650,000 goods which had cost $200,000. Gaspard Farms still owned 15% of the goods at the end of the year. In 2020, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 20% of the goods at year-end. For 2020, cost of goods sold is $1,200,000 for Gaspard Farms and $5,400,000 for Gentry. What is consolidated cost of goods sold for 2020?

Answer 1

$5572500

Step-by-step explanation:

consolidated cost of goods sold for 2020 would be:

consolidated cost of goods sold = ( total of goods sold by bought company ) - ( intra-entity transfer ) + ( ending unrealized gross profit ) - ( beginning unrealized gross profit )

= ( 5400000 + 1200000 ) - ( 1000000 )+(1000000*20%)*20% - {(650000*15%)*(450000/650000)}

= 6600000 - 1040000 - ( 97500 * 45/65 )

= $5572500