Question

Poseidon Co. holds 70% of the common stock of Saturn Co. In the current year, Poseidon report sales of $2,400,000 and cost of goods sold of $1,800,000. For this same period, Saturn has sales of $900,000 and cost of goods sold of $540,000. During the current year, Saturn sold merchandise to Poseidon for $300,000. Poseidon still possesses 40% of this inventory at the end of the current year. Saturn had established the transfer price based on its normal markup. What are consolidated sales and cost goods sold

Answer 1

Consolidated sales are $3,300,000 and consolidated cost of goods sold are $2,340,000.

Step-by-step explanation:

Consolidated sales and cost of goods sold are calculated when a parent company owns a significant percentage of the common stock of another company. In this scenario, Poseidon Co. holds 70% of the common stock of Saturn Co. To calculate consolidated sales, we need to add the sales of both companies. In this case, Poseidon reported sales of $2,400,000 and Saturn reported sales of $900,000. Therefore, consolidated sales would be $2,400,000 + $900,000 = $3,300,000.

To calculate consolidated cost of goods sold, we need to add the cost of goods sold of both companies. Poseidon reported a cost of goods sold of $1,800,000 and Saturn reported a cost of goods sold of $540,000. Therefore, consolidated cost of goods sold would be $1,800,000 + $540,000 = $2,340,000.

Answer 2

Consolidated sales and cost goods sold would be:

Revenue : $3,000,000

Cost of Sales : $2,040,000

Step-by-step explanation:

The Consolidation Process Includes 100% of Poseidon Co. and 100% of Saturn Co.

However Revenues for Saturn is Overstated and Cost of Goods Sold of Poseidon Co. are overstated due to the intragroup sale and thus the sale should be eliminated.

Journal to Eliminate Intragroup Sale

Revenue : Saturn Co $300,000 (debit)

Cost of Sales : Poseidon Co $300,000 (credit)

Consolidated sales and cost goods sold would be:

Revenue : $2,400,000+$900,000-$300,000 = $3,000,000

Cost of Sales : $1,800,000+$540,000-$300,000 = $2,040,000