Luffman Inc. owns 30% of Bruce Inc. and appropriately applies the equity method. During the current year, Bruce bought inventory costing $52,000 and then sold it to Luffman for $80,000. At year-end, all of the merchandise had been sold by Luffman to other customers. What amount of gross profit on intra-entity sales must be deferred by Luffman?

Question

Quizplus · Accepted Answer

Since all the merchandise was sold by Luffman to other customers by year-end, there is no remaining inventory to defer profit on. Therefore, no gross profit needs to be deferred.