On January 1,20X3,Dwayne Ltd

question 28

Multiple Choice

On January 1,20X3,Dwayne Ltd.formed Carlos Co. ,a 100% owned subsidiary.During 20X6,Dwayne sold Carlos $100,000 in goods.The unrealized profit in Carlos' inventories was $20,000 at December 31,20X5 and $25,000 at December 31,20X6.Ignoring income taxes,what adjustment should be made to the consolidated financial statements for the year ended December 31,20X6 to reflect the unrealized profit in Carlos' beginning inventory?

• A)Inventory at December 31,20X6 should be decreased by $20,000.
• B)Cost of goods sold for 20X6 will be decreased by $20,000.
• C)Retained earnings at the end of 20X6 will be increased by $20,000.
• D)Retained earnings at the end of 20X6 will be decreased by $20,000.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance or values of the components in the data set.

Cost of Debt

The effective rate that a company pays on its current debt, which can be measured before or after taxes.

Yield-To-Maturity

The total return anticipated on a bond if it is held until the date it matures.

Total Assets

The sum of all current and long-term assets owned by a company, used to determine the financial strength of a business.