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    Inventory and Intercompany Profit

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    Padlock Corp. owns 90 percent of Safeco, Inc. During the year, Padlock sold 3,000 locking mechanisms to Safeco for $900,000. By the end of the year, Safeco had sold all but 500 of the locking mechanisms to outside parties. Padlock marks up the cost of its locking mechanisms by 60 percent in computing its sales price to affiliated and nonaffiliated customers.

    How much intercompany profit remains in Safeco's inventory at year-end?

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    Solution Preview

    One locking mechanism costs 900,000/3,000 = $300. The cost to produce a ...

    Solution Summary

    Inventory and intercompany profit are investigated.