Walsh Company Sells Inventory to Its Subsidiary, Fisher Company, at a Profit

question 17

Multiple Choice

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2021, which of the following accounts would be credited to eliminate 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 Fisher Company.
• E) Sales.

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Definitions:

Automatic System

A mental process that operates without conscious effort, often responsible for habits and intuitive reactions.

Conscious System

The aspect of the mind that involves awareness of oneself and one's surroundings.

Subjective Norms

Beliefs about whether significant others think one should engage in a behavior.

Behavioral Intention

An individual's perceived likelihood or willingness to engage in a certain behavior or action.