Companies A,B and C are all part of the one economic entity,but are all separate legal entities required to prepare their own financial statements.Company A sold Company B inventory that cost $56 000 for $78 000.At the end of the same period Company B has three-quarters of that inventory still on hand and the rest has been sold to an entity outside the economic group.At what amount should the inventory remaining in Company B be recorded in the consolidated statements?
A) $14 625
B) $56 000
C) $58 500
D) $42 000

Question

Quizplus · Accepted Answer

The inventory should be recorded at the cost to the economic entity, which is the original cost of $56,000. Since three-quarters of the inventory is still on hand, the amount is 0.75 * $56,000 = $42,000.

Companies A,B and C Are All Part of the One