Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells

question 47

Multiple Choice

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. $\begin{array}{lrrr}&2012&2013&2014\\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$ Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. $$\begin{array} { l c c c } & \mathbf { 2 0 1 2 } & \mathbf { 2 0 1 3 } & \mathbf { 2 0 1 4 } \\\text { Gargiulo's net income } & \mathbf { \$ 7 0 , 0 0 0 } & \mathbf { \$ 8 5 , 0 0 0 } & \mathbf { \$ 9 4 , 0 0 0 } \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$$ For consolidation purposes, what amount would be debited to cost of goods sold for the 2012 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise?

• A)$300.
• B)$240.
• C)$2,000.
• D)$1,600.
• E)$270.

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