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:

World of Being

In Plato’s metaphysics, the world of ideal Forms, a world that is unchanging, a world we can know only through reason.

Berkeley

Represents George Berkeley, an 18th-century philosopher known for his theory of immaterialism, arguing that material objects exist only in the mind and through perception.

Esse Est Percipi

A Latin phrase meaning "to be is to be perceived," associated with George Berkeley's idealist philosophy which argues that objects only exist to the extent that they are perceived.

Subjective Idealism

The view that nothing exists except ideas and minds. The eighteenth-century idealist George Berkeley held the extreme position of subjective idealism, which, simply summarized, insisted that “to be is to be perceived” (esse est percipi). According to Berkeley, it makes no sense to believe in the existence of anything that we cannot experience.