Sales Example

Elbonia Corporation, a 100 percent subsidiary of Atomic Corporation, caters to its parent's entire inventory requirements. In 2007, Elbonia produced inventory at a cost of $36,000 and sold it to Atomic for $75,000. Atomic held all the items in inventory on January 1, 2008. During 2008, Atomic sold all the units for $98,000. Assume that the companies had no other transactions during 2007 and 2008.

Based on the preceding information, what amount would be reported in the consolidated financial statements for inventory on January 1, 2008?

A. $39,000

B. $36,000

C. $75,000

D. $0

Based on the preceding information, what amount would be reported in the consolidated financial statements for cost of goods sold for 2007?

A. $39,000

B. $36,000

C. $75,000

D. $0

Based on the preceding information, what amount would be reported in the consolidated financial statements for cost of goods sold for 2008?

A. $0

B. $39,000

C. $36,000

D. $98,000

Based on the preceding information, what amount would be reported in the consolidated financial statements for sales for 2007?

A. $0

B. $39,000

C. $36,000

D. $75,000

Barnes Company acquired 80 percent of the outstanding voting stock of Dean Company on January 1, 2008. During 2008 Dean Company sold inventory costing $50,000 to Barnes Company for $80,000. Barnes Company continued to hold the inventory at December 31, 2008. Also during 2008, Barnes Company sold merchandise costing $400,000 to nonaffiliates for $600,000, and on its separate balance sheet reported total inventory at year end of $140,000. In its separate financial statements, Dean Company reported total sales and cost of goods sold of $350,000 and $220,000, respectively, for 2008 and ending inventory of $150,000.

Required: Based on the above information, compute the amounts that should appear in the consolidated financial statements prepared for Barnes Company and it subsidiary, Dean Company, at year end for the following items: 1) sales; 2) cost of...