A subsidiary entity sold inventory to its parent entity at a profit of $4 000.The goods had originally cost the subsidiary $10 000.At the end of the year all the inventory was still on hand.The adjustment entry to deal with this transaction on consolidation would include the following line item:

Question

Quizplus · Accepted Answer

The adjustment entry would include a credit with the amount of profit made on the sale of the inventory, which is $4,000. The cost of the inventory to the subsidiary is not relevant for the consolidation entry, as it has already been accounted for in the subsidiary's financial statements. Therefore, option B, C, and D are incorrect.

A Subsidiary Entity Sold Inventory to Its Parent Entity at a Profit