Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are
Question:
Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent's and subsidiary's pre-consolidation income statements for the year ending December 31, 2022:
Parent | Subsidiary | |
---|---|---|
Revenues | $3,360,000 | $1,920,000 |
Cost of goods sold | (2,352,000) | (1,248,000) |
Gross profit | $1,008,000 | $672,000 |
On January 1, 2022, the subsidiary held no inventories purchased from the parent. During the year ending December 31, 2022, the parent company sold $600,000 of inventory to its subsidiary. All of the parent's sales to affiliates and non-affiliates have the same gross margin. During 2022, the subsidiary sold to unaffiliated third-party customers all of the items of inventory purchased from the parent.
What amount of revenues will be reported in the consolidated financial statements for the year ended December 31, 2022?
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen