If a parent company sells merchandise to a subsidiary at parent company cost, the inventories and cost of goods sold of the subsidiary are not affected by working paper eliminations.

Question

Quizplus · Accepted Answer

Since the merchandise is sold at the parent company's cost, there are no intercompany profits to eliminate in the consolidation process, thus inventories and cost of goods sold remain unaffected by working paper eliminations.

If a Parent Company Sells Merchandise to a Subsidiary at Parent