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

question 41

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 2013 consolidation worksheet with regard to the unrealized gross profit of the 2013 intra-entity transfer of merchandise?

• A)$1,000.
• B)$800.
• C)$3,000.
• D)$2,400.
• E)$900.

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Definitions:

M2

M2 is a measure of money supply that includes all elements of M1 (cash and liquid assets) plus near money, such as savings deposits, money market securities, and other time deposits, which are less liquid but can easily be converted into cash or checking deposits.

M1

M1 is a category of the money supply that includes physical currency and coin, demand deposits, traveler's checks, and other liquid funds.

Nondepository Financial Institution

Institutions that do not accept traditional demand deposits but instead offer financial products such as mutual funds, insurance, and securities.

Insurance Company

A financial institution that provides coverage, compensating financial losses during events like accidents, theft, or natural disasters, in exchange for premiums.