ABC Corporation owns 75 percent of XYZ Company\'s voting shares. During 20X8, AB
ID: 2523763 • Letter: A
Question
ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 for $130 each. Both companies use perpetual inventory systems.
1. Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X9?
a. $187,000
b. $221,000
c. $1,422,000
d. $2,963,000
Explanation / Answer
Profit on sale of inventory by ABC to XYZ= 90-79 = 11 PER UNIT
Unit sold in 2019 :35000-18000 = 17000units
amount of cost of goods sold must be eliminated from the consolidated income statement for 20X9 = 17000*11= $ 187000
correct option is "A"