Strickland Company Sells Inventory to Its Parent, Carter Company, at a Profit

question 97

Multiple Choice

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

• A) Retained earnings.
• B) Cost of goods sold.
• C) Inventory.
• D) Investment in Strickland Company.
• E) Sales.

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Definitions:

Produce

To create, manufacture, or grow goods and services for consumption or sale.

Firm

A business or company engaged in commercial, professional, or industrial activities.

Maximum Profit

The highest possible financial gain a business can achieve in a given period, optimized through revenue and cost management.

Market Price

The current price at which an asset or service can be bought or sold in a given market, determined by supply and demand dynamics.