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

question 4

Multiple Choice

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher.
In the consolidation worksheet for 2013, 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 Fisher Company.
• E) Sales.

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Definitions:

Outsourced

Refers to having contracted a third-party organization to handle certain business functions or services outside the company.

Predictable

Having a nature or behavior that can be anticipated or expected based on certain indications or patterns.

Fully Or Partly Automated

Systems or processes that are operated either entirely or partially by machines or software to reduce human intervention.

Complexity And Need For Confidentiality

Refers to the intricate nature of certain information or processes and the essential requirement to keep such information protected and undisclosed.