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

question 124

Multiple Choice

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2012. One-third of the inventory is sold by Carter in 2012.
In the consolidation worksheet for 2012, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2012 intra-entity sales?

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

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Definitions:

Homogeneous Mixture

A homogeneous mixture is a mixture in which the composition is uniform throughout, and the individual components are not visibly distinguishable.

Heterogeneous Mixture

A combination of substances that are not uniformly distributed and in which the individual components can be distinguished physically.

Nitrogen

A colorless, odorless gas that is the most abundant element in the Earth's atmosphere, essential for plant and animal life.

Argon

A noble gas element with atomic number 18, colorless and odorless, used in lighting and welding due to its inertness.