A subsidiary sold a quantity of inventory to its parent entity at a before-tax profit of $12 000.The original cost of the inventory to the subsidiary was $41 000.At the end of the year all of the inventory was still on hand.The consolidation adjustment entry to eliminate this transaction will include which of the following line items?
A)Cr Inventory $12 000
B)Cr Inventory $53 000
C)Cr Inventory $41 000
D)Cr Inventory $29 000

Question

Quizplus · Accepted Answer

The consolidation adjustment should eliminate the unrealized profit of $12,000 from the inventory, so the correct entry is to credit Inventory by $12,000.

A Subsidiary Sold a Quantity of Inventory to Its Parent