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Gentry Inc. acquired 100% of Gaspard Farms on January 5, 2017.  During 2017, Gentry sold Gaspard Farms $625,000 of goods, which had cost $425,000. Gaspard Farms still owned 12% of the goods at the end of the year.  In 2018, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 10% of the goods at year-end.  For 2018, the cost of goods sold totaled $5,400,000 for Gentry, and $1,200,000 for Gaspard Farms.  What was consolidated cost of goods sold for 2018

Respuesta :

Answer:

$5,596,000

Explanation:

Consolidated cost of goods sold for 2018:

= Cost of Goods Sold (Gaspard Farm) + Cost of Goods Sold (Gentry Farm) - Inter Farm Sales from Gentry to Gaspard + Unrealized Profit on the Sales from Gentry to Gaspard - Unrealized Profit on the Sales from Gaspard to Gentry

= $1,200,000 + $5,400,000 - $1,000,000 + [($1,000,000 - $800,000) × 10%] - [($625,000 - $425,000) × 12%]

= $1,200,000 + $5,400,000 - $1,000,000 + $20,000 - $24,000  

= $5,596,000

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