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eleuthromania
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Joined: 20 Mar 2016
Online Status: Offline
Posts: 3

Posted: 01 Apr 2016 at 00:28 \| IP Logged

My main struggle with understanding this problem was the 25% gross margin used, but now I finally get it.

Beginning inventory:           0
Purchases (sales price):         200,000
Cost of goods available:           200,000
Ending inventory (Lamm):       60,000(30%)
Cost of goods sold:    140,000(70%)
Intercomp. profit in
Spin's COGS ($50,000x30%):   15,000 (elimination entry we were looking for)
Intercomp. profit in
Spin's end. inv. ($50,000x70%): 35,000

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