A subsidiary sold goods to its parent company.At its year-end,the parent company still had some of the goods in inventory.Included in the value of these inventories is $15,000 of unrealized profits.What journal entry should be made to eliminate these unrealized profits?

Question

Quizplus · Accepted Answer

The journal entry to eliminate unrealized profits on intra-group inventories is to reduce the cost of sales and the inventory value by the unrealized profit amount at the consolidated level. Therefore, option B is the correct choice as it reduces the inventory and cost of sales by $15,000. The other options are incorrect as they do not eliminate the unrealized profit correctly.

A Subsidiary Sold Goods to Its Parent Company