Push Company owns 60% of Shove Company's outstanding common stock.
Intra-entity sales are as follows:

-Assume Push sold the inventory to Shove.
Using the fully adjusted equity method,what journal entry would be recorded by Push to recognize the realization of the 20X1 deferred intercompany profit and to defer the 20X2 unrealized gross profit on inventory sales to Shove?

Question

Push Company owns 60% of Shove Company's outstanding common stock.
Intra-entity sales are as follows:
 
-Assume Push sold the inventory to Shove.
Using the fully adjusted equity method,what journal entry would be recorded by Push to recognize the realization of the 20X1 deferred intercompany profit and to defer the 20X2 unrealized gross profit on inventory sales to Shove?

Quizplus · Accepted Answer

Under the fully adjusted equity method, Push would recognize the realization of the deferred intercompany profit from 20X1 by debiting the investment in Shove and crediting income from Shove. For the 20X2 unrealized gross profit, Push would defer it by debiting income from Shove and crediting the investment in Shove.

Push Company Owns 60% of Shove Company's Outstanding Common Stock