Prince Co.owned 80% of Kile Corp.'s common stock.During October 2018, Kile sold merchandise to Prince for $140,000.At December 31, 2018, 50% of this merchandise remained in Prince's inventory.For 2018, gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.The amount of intra-entity gross profit remaining in ending inventory at December 31, 2018 that should be eliminated in the consolidation process is:
A) $28,000.
B) $56,000.
C) $22,400.
D) $21,000.
E) $42,000.

Question

Quizplus · Accepted Answer

Prince's share of Kile's gross profit on the intra-entity sale is 80% x $140,000 x 40% = $44,800. The amount of this gross profit remaining in Prince's inventory at December 31, 2018 is 50% x $44,800 = $22,400.

Prince CoOwned 80% of Kile Corp