Pam Corporation owns an 80 percent interest in Sun Corporation acquired several years ago. Sun regularly sells merchandise to Pam at 125 percent of Sun's cost. Gross profit data of Pam and Sun for 2017 are as follows:
____________________ Pam _____________ Sun
Sales ........................ $1,000 ................. $800
Cost of goods sold ......... 800 ................... 640
Gross profit ................ $ 200 ................. $160
During 2017, Pam purchased inventory items from Sun at a transfer price of $400. Pam's December 31, 2016 and 2017, inventories included goods acquired from Sun of $100 and $125, respectively. Assume Pam sells the inventory purchased from Sun in the following year.
1. Consolidated sales of Pam Corporation and Subsidiary for 2017 were:
a. $1,800
b. $1,425
c. $1,400
d. $1,240
2. The unrealized profits in the year-end 2016 and 2017 inventories were:
a. $100 and $125, respectively
b. $80 and $100, respectively
c. $20 and $25, respectively
d. $16 and $20, respectively
3. Consolidated cost of goods sold of Pam Corporation and Subsidiary for 2017 was:
a. $1,024
b. $1,045
c. $1,052.8
d. $1,056