I'm not sure what to do on this one.

Details:
(1) Parent company owns 80% of subsidiary.
(2) Parent company sells goods to subsidiary for $300,000, with a 30% gross profit margin (in the current year). 10% of the goods remain unsold at end of year.

On the consolidation, do I eliminate $300,000 of revenue and $300,000 of cost of goods sold? I realize I have to adjust the unrealized portion of gain on sale, taxes, and establish a tax asset ($90,000 net profit * 10% unrealized at year end, and taxes and such).

I'm specifically curious about the gross profit margin relating to the goods. Does this mean the direct costs of manufacturing haven't been expensed yet, so on consolidation the full $300,000 is reversed? Would the individual company have recorded: DR Cash $300k, DR COGS $210k, CR revenue $300k, CR inventory $210k?

Looking back at previous things I've done, I haven't really dealt with inventory all that much in a fluid, realistic way... and at work, inventory is rarely something I need to look at... so I'm feeling foggy on this.

This post was edited by Canadian_Man on Oct 27 2017 04:04pm

parent p&l
300k sales
210k cogs
90k gross (30% gm)

parent assets
23.3k inventory (10% left unsold, 233k for the year and 90% sold to subsidiary at 210k)

subsidiary p&l (80% ownership not factored)
300k in expenses for goods

Factoring 80% ownership, 240k expenses in goods recognized for parent P&L (not sure if subsidiary uses inventory as COGS or opex)

Now net them together