Upstream sales
Par Corporation owns an 80 percent interest in Sel Corporation acquired several years ago. Sel regularly sells merchandise to its parent at 125 percent of Sel’s cost. Gross profit data of Par and Sel for 2012 are as follows:
|
Par |
Sel |
|
|
Sales |
$1,000,000 |
$800,000 |
|
Cost of goods sold |
800,000 |
640,000 |
|
Gross profit |
$ 200,000 |
$160,000 |
During 2012, Par purchased inventory items from Sel at a transfer price of $400,000. Par’s December 31, 2011 and 2012, inventories included goods acquired from Sel of $100,000 and $125,000, respectively. Assume Par sells the inventory purchased from Sel in the following year.
1. Consolidated sales of Par Corporation and Subsidiary for 2012 were:
a $1,800,000
b $1,425,000
c $1,400,000
d $1,240,000