Pot Co Holds 90% of the Common Stock of Skillet Co

question 118

Multiple Choice

Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011. What are consolidated sales and cost of goods sold for 2011?

• A) $1,400,000 and $952,000.
• B) $1,400,000 and $966,000.
• C) $1,540,000 and $1,078,000.
• D) $1,400,000 and $1,022,000.
• E) $1,540,000 and $1,092,000.

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Definitions:

Rights

Legal entitlements or permissions granted to individuals or entities, often referring to stock rights in a corporate context, allowing shareholders to buy new shares before the general public.

Common Stockholders

Individuals or entities that own shares of common stock in a company, giving them voting rights and potential dividends.

Preferred Stockholders

Investors who own preferred shares in a company, granting them priority in dividend payments and assets in the event of liquidation over common stockholders, but typically without voting rights.

Paid-In Capital

The total amount of money that shareholders have invested in a company by purchasing its stock, excluding retained earnings.