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Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.
Initial Value Method
An accounting approach where investments are recorded at their original cost without subsequent adjustment for changes in value.
Intra-entity Gross Profit
The profit recognized on transactions within different parts of the same company.
Consolidation Worksheet
A financial tool used to merge and organize the financial information of parent and subsidiary companies for reporting purposes.
- Engage in understanding the consolidation sequence, especially the extermination of internal transactions.
- Evaluate the repercussions of intra-company sales of stock on unified financial records.
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Learning Objectives
- Engage in understanding the consolidation sequence, especially the extermination of internal transactions.
- Evaluate the repercussions of intra-company sales of stock on unified financial records.
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