_____ In 2006, Semco resold for $55,000 inventory that it had acquired in 2005 from its parent, Pemco, for $30,000. Pemco's cost was $40,000. Which account is credited in consolidation at 12/31/06?

Question

Quizplus · Accepted Answer

In consolidation, intercompany transactions are eliminated to avoid overstating revenues, expenses, and inventory. Since the question does not specify an account that directly reflects the elimination of the profit margin on the intercompany sale (which would be $15,000, the difference between Pemco's cost of $40,000 and Semco's purchase price of $55,000), none of the provided options accurately describe the consolidation entry needed to eliminate the intercompany profit.

_____ in 2006, Semco Resold for $55,000 Inventory That It