Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Compute consolidated sales.

A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

Question

Marques Itsyaboy · Accepted Answer

Final Answer : C, Explanation :  Patti's sales are $10,000,000. Shannon's sales are $200,000. Patti sold $60,000 of merchandise to Shannon, of which Shannon still has 30% in inventory at the end of the year. This means that Patti's sales to Shannon were actually $60,000 * (1 - 0.3) = $42,000. Therefore, consolidated sales are $10,000,000 + $200,000 + $42,000 = $10,140,000.

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