P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation
ID: 2501553 • Letter: P
Question
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2016, P sold merchandise that cost $240,000 to S for $300,000. Half of this merchandise remained in S’s December 31, 2016 inventory. During 2017, P sold merchandise that cost $375,000 to S for $468,000. Forty percent of this merchandise inventory remained in S’s December 31, 2017 inventory. Selected income statement information for the two affiliates for the year 2017 is as follows: P S Sales Revenue $2,250,000 $1,125,000 Cost of Goods Sold 1,800,000 937,500 Gross profit $450,000 $187,500 Consolidated sales revenue for P and Subsidiary for 2017 are:
a) $2,907,000. b) $3,000,000. c) $3,205,500. d) $3,375,000.
Explanation / Answer
Consolidated sales revenue = P's revenue + S's revenue – intra-group sales
=2,250,000+1125000-468,000=2,907,000
Answer is Option A)2,907,000
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