A parent sold some inventory to its subsidiary for $55 000.The goods had originally cost the parent $40 000.At the end of the year all of the inventory was still on hand.The consolidation adjustment entry to eliminate this transaction will include the following line items?
A)Cr Cost of sales $15 000
B)Cr Cost of sales $40 000
C)Cr Cost of sales $95 000
D)Cr Cost of sales $55 000

Question

Quizplus · Accepted Answer

To eliminate this transaction, the parent's cost of sales account needs to be decreased by the original cost of the inventory sold to the subsidiary, which is $40,000. Therefore, the correct entry would be to credit cost of sales for $40,000. The other options do not correctly account for the original cost of the inventory.

A Parent Sold Some Inventory to Its Subsidiary for $55