P Inc. owns a 60% interest in S Corp. During 2020 S sold inventory costing $160,000 to P for $200,000. A total of 18

Question

P Inc. owns a 60% interest in S Corp. During 2020 S sold inventory costing $160,000 to P for $200,000. A total of 18 percent of this inventory was not sold to outsiders until 2021. During 2021 S sold inventory costing $297,500 to P for $350,000. A total of 30 percent of this inventory was not sold to outsiders until 2022. In 2021 P reported cost of goods sold of $607,500 while S reported $450,000. What is consolidated cost of goods sold in 2021?

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Calculation of Consolidated cost of goods sold: Parent balance $607,500 Add: Subsidiary balance $450,000 Less: Intra-entity transfers $350,000 Less: Beginning unrealized gross profit $7,200 Add: Ending unrealized gross profit $15,750 Consolidated cost of goods sold $716,050 Workings: Beginning unrealized gross profit $7,200 (18% * $200,000) * [($200,000 - $160,000)/$200,000] Ending unrealized gross profit $15,750 (30% * $350,000) * [($350,000 - $297,500)/$350,000]

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Calculation of Consolidated cost of goods sold:
Parent balance	$607,500
Add: Subsidiary balance	$450,000
Less: Intra-entity transfers	$350,000
Less: Beginning unrealized gross profit	$7,200
Add: Ending unrealized gross profit	$15,750
Consolidated cost of goods sold	$716,050

Workings:
Beginning unrealized gross profit	$7,200
(18% * $200,000) * [($200,000 - $160,000)/$200,000]

Ending unrealized gross profit	$15,750
(30% * $350,000) * [($350,000 - $297,500)/$350,000]