@hitmi, doesn't look like anyone answered your question above regarding the intercompany transaction. The GP in the question is more or less implied. The question shows that Lamm ships to Banks inventory worth 150,000 but Banks records it at 200,000. This is a 50,000 markup that Lamm would otherwise show, but because they are related parties they cannot. We need to take this amount out of the ending inventory Banks has from Lamm in order to get the true cost of the inventory, less the markup. To do this: 150,000/200,000 = .75. Then multiply that by Banks' ending inventory from Lamm (60,000 * .75 = 45,000). This 45,000 is the amount of the inventory less any markup, which eliminates the amount of the GP that would have otherwise been recognized when this inventory was eventually sold. 45,000 +175,000 + 250,000 = 470,000.
.