Question
In 2023, A Ltd. sold merchandise to its subsidiary, B Company, for $80,000 at a gross profit rate of 30%. B Company was able to
In 2023, A Ltd. sold merchandise to its subsidiary, B Company, for $80,000 at a gross profit rate of 30%. B Company was able to sell 60% of the merchandise to outsiders by the end of the fiscal period. What effect does this intercompany transaction have on consolidated cost of goods sold?
A The purchase component increases cost of goods sold by $80,000 and the ending inventory component decreases cost of goods sold by $14,400.
B Cost of goods sold has an overall decrease of $32,000.
C, The purchase component decreases cost of goods sold by $80,000 and the ending inventory component increases cost of goods sold by $9,600.
D No effect.
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