A Subsidiary Sold Inventories to Its Parent in Year 1

question 27

Multiple Choice

A subsidiary sold inventories to its parent in year 1 at a before-tax profit of $15 000. At balance sheet date, the parent had not sold the inventories to an external party. The company tax rate is 30%. The year 1 consolidation worksheet will contain which of the following adjustment entries for inventories?

• A) Dr Inventories $15 000
• B) Dr Inventories $10 500
• C) Cr Inventories $15 000
• D) Cr Inventories $10 500

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Definitions:

Temporary Solutions

Short-term fixes intended to address problems until more permanent solutions can be implemented.

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A negotiation strategy focused on collaborating with the other party to find solutions that satisfy the interests of all parties involved.

Superordinate Goals

Objectives that require the cooperation and effort of two or more groups or individuals, which can help reduce conflict by establishing common interests.

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