A Subsidiary Sold Inventories to Its Parent for $40 000

question 31

Multiple Choice

A subsidiary sold inventories to its parent for $40 000. The inventories originally cost the subsidiary $32 000. At balance sheet date, the parent had 20% of the inventories still on hand. The consolidation adjustment entry (excluding tax effects) will eliminate unrealised profit amounting to:

• A) $6400.
• B) $1600.
• C) $8000.
• D) $9600.

---

Definitions:

Formal Operational

The stage of cognitive development, according to Jean Piaget, in which individuals become capable of abstract thinking and hypothetical reasoning.

Preoperational

The stage in Piaget's theory of cognitive development where children from about 2 to 7 years old exhibit egocentric thinking and struggle with understanding the viewpoint of others.

Negative Outcomes

refers to the undesirable or harmful results of actions or conditions, often contrasted with positive results or benefits.

Adolescents

A developmental stage that describes young people transitioning from childhood to adulthood, typically characterized by significant physical, psychological, and social changes.