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what amount of inventory is reported in the consolidated balance 27 sheet at December 31, 2018? * [ Tala Co
what amount of inventory is reported in the consolidated balance 27 sheet at December 31, 2018? * [ Tala Co. owns an 80% interest in Kilometro Inc., acquired several years ago. Kilometro regularly sells merchandise to its parent at 125% of its cost. Gross profit data of Tala and Kilometro for the year 2018 are:
Sales
Tala- 2,500,000
Kilometro- 1,800,000
Cost of Sales
Tala- 1,800,000 Kilometro- 1,240,000 During 2018, Tala purchased inventory items from Kilometro at a transfer price of 400,000. Tala December 31, 2017 and 2018 inventories were 500,000 and 600,000 respectively, which included goods acquired from Kilometro of 125,000 and 100,000 respectively. The inventory of Kilometro at the beginning and end of 2018 were 350,000 and 400,000 respectively. As of December 31, 2018, 60% of the year's shipment is not yet paid by Tala.
Expert Solution
Inventory is recorded and reported on a company's balance sheet at its cost (intercompany profits should be eliminated). When an inventory item is sold, the item's cost is removed from inventory and the cost is reported on the company's income statement as the cost of goods sold.
Although, Tala only has 80% interest in Kilometro, Inc. the inventory declared in the consolidated balance sheet will show 100% of Kilometro's inventory (not 80%) since the 20% non-controlling interest is also presented in the total shareholders' equity.
| Tala, ending inventory from outside suppliers, at cost (600,000 - 100,000) | 500,000 | |||
| Tala, ending inventory from Kilometro, at cost (100,000 / 125%) | 80,000 | |||
| Kilometro, ending inventory, from outside suppliers at cost | 400,000 | |||
| Ending inventory, consolidated balance sheet | 980,000 | |||
Hope this helps. Let me know if you have questions and I would happily respond. Have a great day. Cheers!
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