In 2023, A Ltd. sold merchandise to its subsidiary, B Company, for $80,000 at a gross profit
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Question:
In 2023, A Ltd. sold merchandise to its subsidiary, B Company, for $80,000 at a gross profit rate of 30%. B Company was able to sell 60% of the merchandise to outsiders by the end of the fiscal period. What effect does this intercompany transaction have on the consolidated cost of goods sold?
A, The purchase component increases the cost of goods sold by $80,000 and the ending inventory component decreases the cost of goods sold by $14,400.
B, Cost of goods sold has an overall decrease of $32,000.
C, The purchase component decreases the cost of goods sold by $80,000 and the ending inventory component increases the cost of goods sold by $9,600.
D, No effect.
Related Book For
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
7th edition
Authors: Hilton Murray, Herauf Darrell
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