A Subsidiary Entity Sold Inventory to Its Parent Entity at a Profit

question 25

Multiple Choice

A subsidiary entity sold inventory to its parent entity at a profit of $8 000.The goods had originally cost the subsidiary $20 000.At the end of the year all the inventory was still on hand.The adjustment entry to deal with this transaction on consolidation would include the following line item:

• A)CR Cost of sales $28 000
• B)CR Cost of sales $20 000
• C)CR Cost of sales $12 000
• D)CR Cost of sales $8 000.

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Definitions:

Misleading the Reader

Presenting information in a way that could cause the reader to have a false understanding or impression.

Cushion the Negative Point

A communication technique involving the softening of potentially negative or unfavorable information to minimize its impact on the audience.

Closing Statement

The final comment or conclusion at the end of a document, presentation, or discussion aimed at summarizing the main points and leaving a lasting impression.

Claim Message

A communication piece that asserts a right, demands an entitlement, or expresses a grievance needing resolution.