Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher.
In the consolidation worksheet for 2012, which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2012 intra-entity sales?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

Question

Quizplus · Accepted Answer

The credit entry to eliminate unrealized intra-entity gross profit is made to the Inventory account to reduce it by the amount of the unrealized profit.

Walsh Company Sells Inventory to Its Subsidiary, Fisher Company, at a Profit