Question

Premier Company owns 90 percent of the voting shares of Stanton, Inc. Premier reports sales of $480,000 during the current year, and Stanton reports $264,000. Stanton sold inventory costing $28,800 to Premier (upstream) during the year for $57,600. Of this amount, 25 percent is still in ending inventory at year-end. Total receivables on the consolidated balance sheet were $81,800 at the first of the year and $119,100 at year-end. No intra-entity debt existed at the beginning or end of the year. Using the direct method, what is the consolidated amount of cash collected by the business combination from its customers

Answer 1

$649,100

Step-by-step explanation:

Calculation to determine the consolidated amount of cash collected by the business combination from its customers

Using this formula

Consolidated amount of cash collected=Premier Sales+Stanton Sales-Inventory-(Ending Total receivables- Beginning Total receivables)

Let plug in the formula

Consolidated amount of cash collected=($480,000 + $264,000-$57,600)-($119,100-$81,800)

Consolidated amount of cash collected= $686,400 -$37,300

Consolidated amount of cash collected== $649,100

Therefore the consolidated amount of cash collected by the business combination from its customers is $649,100