_____ In early 2005, Pye sold inventory costing $33,000 to its 100%-owned subsidiary, Slyce, for $44,000. At 12/31/05, Slyce made a lower-of-cost-or-market adjustment of $6,000 for this inventory, all of which was still on hand. What amount is reported for this inventory in the 12/31/05 consolidated balance sheet?

Question

Quizplus · Accepted Answer

In a consolidated balance sheet, intercompany profits must be eliminated. Since Pye sold the inventory to Slyce (its 100%-owned subsidiary) at a profit, this profit is not recognized in the consolidated financial statements. The inventory should be reported at its original cost to the consolidated entity, which is $33,000. The lower-of-cost-or-market adjustment made by Slyce does not affect the consolidated amount, as the inventory's original cost to the parent company is considered.

_____ in Early 2005, Pye Sold Inventory Costing $33,000 to Its