i was going through the becker sims for consoliodations-2nd one, i am getting confused with the inventory mark up cost.

During 20X4 Cain purchased merchandise from Frey at an aggregate invoice price of 180000 which included a 100% markup on Frey's cost.  At December 31 20X4 Cain owed Frey 86000 on these purchases and 36000 of this merchandise remained in Cain's inventory.

Since sales are 180,000 and include a 100% markup on cost this means that cost of sales for Frey must have been 90,000 (half the amount). Think it like this: When a merchant sells you something at double the price, you think: "this merchant made a 100% profit on this" To this amount you have to add the cost of sales of the subsidiary which is 180,000 purchased-36,000 at ending inventory=144,000 sold. The intercompany profit in these 144,000 is again halfed, so 72,000.

90,000(PARENT)+72,000(SUB)=162,000 total to be eliminated

Inventory is 36000/2=18,000 (the profit of 100% is eliminated in ending inventory)

Hope that helps