During the current period, a subsidiary entity sold inventories 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 inventories were still on hand. The adjustment entry to deal with this transaction on consolidation would include the following line item:

Question

Quizplus · Accepted Answer

The profit of $4,000 is unrealized because the inventories are still on hand. Therefore, the inventories need to be adjusted by this unrealized profit amount.

During the Current Period, a Subsidiary Entity Sold Inventories to Its