Question

Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 25,000 computer desks at a cost of $82 each and sold 10,000 of them to Schedule for $94 each. Schedule sold 7,000 of the desks to unaffiliated companies for $130 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $140 each. Both companies use perpetual inventory systems.
Required

a. What amounts of cost of goods sold did Karlow and Draw record in 20X3?

b. What amount of cost of goods sold must be reported in

Answer 1

Answer:

1. $820,000 and $658,000

2. $574,000

Explanation:

We assume planner corporation is a Karlow corporation and Schedule Company is Draw company

1. The computation is shown below:

Cost of goods sold = Number of units sold × cost per desk

For Karlow, it would be

= 10,000 × $82

= $820,000

For Draw it would be

= 7,000 × $94

= $658,000

2. We assume the question is asking the cost of goods sold reported in the income statement.

So, the costs of goods sold would be

= Desk sold by Draw company × cost per desk

= 7,000 desk × $82

= $574,000