A subsidiary entity sold goods to its parent entity at a profit of $10 000.The goods had originally cost the subsidiary $15 000.At reporting date,the parent still held all of the goods.Which of the following adjustments must be included as part of the consolidation entry to eliminate this transaction?

Question

Quizplus · Accepted Answer

The unrealized profit of $10,000 must be eliminated from the inventory on consolidation, so the correct adjustment is to credit inventory by $10,000.

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