Inventory pro?ts with lower-of-cost-or-market adjustment. Hide Corporation is a wholly owned subsidiary of Seek Company. During 20X1, Hide sold all of its production to Seek Company for $400,000, a price that includes a 20% gross pro?t. 20X1 is the ?rst year that such intercompany sales were made. By year-end, Seek sold 80% of the goods it had purchased for $416,000. The balance of the intercompany goods, $80,000, remained in the ending inventory and was adjusted to a lower fair value of $70,000. The adjustment was a charge to the cost of goods sold.
1. Determine the gross pro?t on sales recorded by both companies.
2. Determine the gross pro?t to be shown on the consolidated income statement.