If a subsidiary sells merchandise to the parent company at a markup above subsidiary cost, the Cost of Goods Sold ledger account of the subsidiary is not affected by working paper eliminations.

Question

Quizplus · Accepted Answer

The Cost of Goods Sold (COGS) ledger account of the subsidiary reflects the actual cost of goods sold to the parent, including any markup. Working paper eliminations adjust intercompany profits and inventory valuations on the consolidated financial statements but do not alter the subsidiary's individual ledger accounts.

If a Subsidiary Sells Merchandise to the Parent Company at a Markup