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11 November, 10:10

Top Company holds 90 percent of Bottom Company's common stock. In the current year, Top reports sales of $800,000 and cost of goods sold of $600,000. For this same period, Bottom has sales of $300,000 and cost of goods sold of $180,000. During the current year, Bottom sold merchandise to Top for $100,000. The parent still possesses 40 percent of this inventory at the current year-end. Bottom had established the transfer price based on its normal gross profit rate. What are the consolidated sales and cost of goods sold?

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  1. 11 November, 10:23
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    690,000

    Step-by-step explanation:

    given,

    sale of the company = $800,000

    cost of the good sold = $600,000

    percentage = / dfrac{800000-600000}{800000}

    = 25%

    unrealized gross profit = $100000

    = ($100000 * 0.40) * 0.25

    = $ 10,000

    consolidated Sales = 800000 + 300,000 - 100000

    = $ 1,000,000

    Consolidated COGS = $600,000 + $180,000 - 100,000 + 10,000

    = 690,000
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