Robson Ltd

question 43

Multiple Choice

Robson Ltd. acquired 80% of Cool Co. in 2012. During 2012, Cool sold inventory to Robson. At the end of 2013, the goods were still in Robson's inventory. Robson correctly eliminated the $20,000 of unrealized profits on its 2013 consolidated financial statements and the goods were finally sold in 2014. In preparing its 2014 consolidated financial statements, what adjustments should be made with respect to the previously unrealized profit?

• A)Decrease cost of sales by $20,000, decrease beginning retained earnings by $16,000, and decrease the beginning non-controlling interest by $4,000.
• B)Increase both cost of sales and beginning retained earnings by $20,000.
• C)Increase cost of sales by $20,000, increase beginning retained earnings by $16,000, and increase the beginning non-controlling interest by $4,000.
• D)No entry is required.

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Definitions:

Spending Variance

The difference between the actual amount spent and the budgeted or expected amount in a given period, often related to costs or expenditures.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost, indicating how much more or less was spent on materials than anticipated.

Total Expenses

The sum of all costs and expenses associated with operating a business, including both fixed and variable costs.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular cost or expense category.