Intercompany Inventory Transactions

Assume that a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parents and subsidiarys pre-consolidation financial statements and the consolidated financial statements for the year ending December 31, 2019:

	Parent	Subsidiary	Consolidated
Income Statement
Revenues	$4,200,000	$2,850,000	$6,150,000
Cost of goods sold	(2,730,000)	(1,710,000)	(3,550,500)
Gross profit	1,470,000	1,140,000	2,599,500
Income from subsidiary	222,000		-
Selling, general & administrative expenses	(1,200,000)	(907,500)	(2,107,500)
Net income	$492,000	$232,500	$492,000
Statement of retained earnings
Retained earnings, January 1	$300,000	$277,500	$300,000
Net income	492,000	232,500	492,000
Dividends declared	(90,000)	(67,500)	(90,000)
Retained earnings, December 31	$702,000	$442,500	$702,000
Balance Sheet
Cash	$90,000	$60,000	$150,000
Accounts receivable	180,000	112,500	244,500
Inventories	195,000	135,000	298,500
Investment in Subsidiary	973,500		-
Property, plant & equipment	1,275,000	930,000	2,205,000
Goodwill	0	0	75,000
Total assets	$2,713,500	$1,237,500	$2,973,000
Accounts payable	$120,000	$82,500	$154,500
All other liabilities	450,000	225,000	675,000
Common stock & APIC	1,441,500	487,500	1,441,500
Retained earnings	702,000	442,000	702,000
Total liabilities and equity	$2,713,500	$1,237,500	$2,973,000

The parent sold inventories to the subsidiary during both 2018 and 2019. For these sales to the subsidiary, the parent earns a gross profit of 35%.

1. What is the amount of intercompany sales between the parent and subsidiary during the year ending December 31, 2019?

2.What is the amount of parent-company profit from intercompany inventory transactions that was in the subsidiarys ending inventory on December 31, 2019?

3.What is the amount of parent-company profit from intercompany inventory transactions that was in the subsidiarys beginning inventory on January 1, 2019?