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Top Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports...

Top Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports sales of $1,000,000 and cost of goods sold of $800,000. For this same period, Bottom has sales of $500,000 and cost of goods sold of $300,000. During the current year, Top sold merchandise to Bottom for $300,000. The subsidiary still possesses 60 percent of this inventory at the current year-end. Top had established the transfer price based on its normal gross profit rate. What are the consolidated sales and cost of goods sold?

  • $1,200,000 and $1,052,000.

  • $1,200,000 and $872,000.

  • $1,200,000 and $836,000.

  • $1,150,000 and $908,000.

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Answer #1

Intra sales and purchase of $ 300,000 to be eliminated Gross profit on ending inventory is 300000*60%gross profit rate Gross

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