Question: for the problem below can you please explainshow how to...
For the problem below, can you please explain/show how to find the cost of the ending intercompany inventory in Sam's books at the end of 2016 and 2017? Does a selling price of 150% over the cost of producing the inventory mean that we are assuming selling price/transfer price = 150%, cost = 100%, and so gross profit is 50%?
Sam Company is a 100% owned subsidiary of Pickles Company. Pickles sells all of its output to Sam at 150 percent of Pickles' cost of production. During 2016 and 2017, Pickles sales to Sam were $9,000 and $7,000, respectively. Sam's ending inventory at Dec 31, 2016 included $3,000 of the merchandise acquired from Pickles, and its Dec, 31, 2017 inventory included $2,400 of such merchandise.