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.

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Definitions:

Deindividuation

A psychological state where an individual loses self-awareness and feels less responsible for their actions, often occurring within group settings.

Self-Awareness

Perception of one’s self-identity, emotional experiences, incentives, and goals.

Irresponsible Behavior

Actions that show a lack of consideration for the consequences of one's actions, especially in regard to others' welfare and rights.

Deindividuated

A psychological state in which an individual loses self-awareness and a sense of individuality, often in group settings, leading to uncharacteristic behavior.