Detailed Answer
(d) The requirement is to determine the amount of
selling expenses to be reported in Pard’s year 1 consolidated
income statement. Pard’s selling expenses for year 1 include
$50,000 in freight-out costs for goods sold to Seed, its subsidiary.
This $50,000 becomes part of Seed’s inventory because it is a
cost directly associated with bringing the goods to a salable condition.
None of the $50,000 represents a selling expense for the
consolidated entity, and $1,450,000 ($1,100,000 + $400,000 –
$50,000) should be reported as selling expenses in the consolidated
income statement.