In the consolidation worksheet for 2018, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be debited to defer unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question

Quizplus · Accepted Answer

The initial value method records the investment at cost and does not recognize intra-entity profits until realized. Therefore, to defer unrecognized intra-entity gross profit from prior periods, retained earnings would be adjusted.

In the Consolidation Worksheet for 2018, Assuming Carter Uses the Initial