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Dear sir, please help me in this MCQ with simple explanation
A own a controlling investment of 70% of B, during the year, A sold goods to B for $60,000 at cost plus 20%. At the year end, B still had half of the goods in their inventory. As total inventory at the year end Was $120,000, and B total inventory was $80,000. How much inventory should be recognized in As consolidated SOFP. With small explanation
A. $200,000
B. $195,000
C. $176,000
D. $158,000Thanks so much in advance
The profit on the sale from A to B was $10,000 (cost $50,000 + 20% mark-up = $60,000 sale price)
Half of those goods ($30,000 cost to B) are still in B’s inventory and included at a value of $30,000 within the B inventory of $80,000
But there’s a pup of half of that $10,000 profit so $5,000 needs to be deducted from the consolidated inventory figure bringing B’s inventory down to $80,000 – $5,000 pup = $75,000
And A’s inventory is $120,000 so total group inventory must be $120,000 + $75,000 = $195,000
The answer should be option B $195,000
Did I get it right?
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