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 debited to eliminate 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.

Question

Quizplus · Accepted Answer

Cost of goods sold is debited to eliminate unrecognized intra-entity gross profit.

Strickland Company Sells Inventory to Its Parent, Carter Company, at a Profit