Big Co. purchased 60% of Little Co. stock during 2022. During 2022, Little Co. sold inventory to Big Co for$100,000. The merchandise originally cost Little Co.$70,000.

During 2022, Big Co resold 40% of this merchandise to third parties. The remainder was resold during 2023.

Little Co reports earnings of $100,000 each year.

Q1) What was the total gross profit on the intercompany sale of merchandise and how much of the gross profit was realized in2022?

Q2) Assume that in 2023 there were no additional intercompany sales of merchandise. What is the income to the NC Interest in 2023?

Answer rating: 100% (QA)

Since goods are sold by parent the unrealized profit is in the books of holding co... View the full answer