On March 31, 2013 a Parent Received $20,000 in Inventory

question 4

Multiple Choice

On March 31, 2013 a parent received $20,000 in inventory for cash from its subsidiary. The subsidiary made a profit of $5,000 on the sale. At year end, the parent had sold $15,000 of this inventory to third parties for $28,000. The closing balance of this inventory is $5,000. What is the combined adjustment to sales and cost of sales before tax?

• A)$1,000
• B)$1,250
• C)$1,500
• D)$2,000

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Definitions:

Barriers to Entry

These are obstacles that prevent new competitors from easily entering an industry or area of business.

Oligopoly

A market structure characterized by a small number of firms that have significant control over market prices and competition.

Interdependence

The mutual reliance among businesses, individuals, industries, or economies, where the actions of one participant affect the outcomes of another.

Rivals

Competitors within the same industry or market that vie for the same customer base.