Pilla Corporation acquired 80% ownership of Schilla Incorporated, at a time when Pilla's investment cost was...
Pilla Corporation acquired 80% ownership of Schilla
Incorporated, at a time when Pilla's investment cost was equal to
80% of Schilla's book value. At the time of acquisition, the book
values and fair values of Schilla's assets and liabilities were
equal. Pilla uses the equity method.
During 20X4, Pilla sold goods to Schilla for $160,000 making a
gross profit percentage of 40%. Half of these goods remained unsold
in Schilla's inventory at the end of the year.
Income statement information for Pilla and Schilla for 20X4 were as
follows:
Pila Schilla
Sales revenue 800,000 300,000
COGS 500,000 120,000
Oper. Exp. 200,000 80,000
Separate income 100,000 100,000
The 20X4 consolidated income statement showed cost of goods sold of:
Select one:
a. $460,000
b. $524,000
c. $492,000
d. $620,000
e. $452,000
Homework Answers
The correct answer is
$ 492000
Calculation
Consolidated cost of goods sold
= cost of goods sold of both companies - intercompany cost of goods sold
= (500000+120000) - (80000+(80000*60%))
= $ 492000
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