Clancy Incorporated, sold $210,000 of its inventory to Reid Company during 2013 for $350,000. Reid sold $224,000 of this merchandise in 2013 with the remainder to be disposed of during 2014. Assume Clancy owns 30% of Reid and applies the equity method. What journal entry will be recorded at the end of 2013 to defer the unrealized intra-entity profits?

Question

Quizplus · Accepted Answer

$350,000 - $210,000 = $140,000 × (1 - ($224,000/$350,000)) = $50,400 × 30% = $15,120 Profit deferred by reduction <CR> in the Investment in Reid Account

Clancy Incorporated, Sold $210,000 of Its Inventory to Reid Company