REFERENCE: 01-06
Clancy Incorporated Sold $210,000 of Its Inventory to Reid

question 68

Multiple Choice

REFERENCE: 01-06
Clancy Incorporated sold $210,000 of its inventory to Reid Company during 2018 for $350,000.Reid sold $224,000 of this merchandise in 2018 with the remainder to be disposed of during 2019.Assume Clancy owns 30% of Reid and accounts for its investment using the equity method.
-What journal entry will be recorded at the end of 2018 to defer the recognition of the investor's share of the intra-entity gross profits?
A.
$\begin{array}{llr} \text { Equity in income of Reid } &\$50,400\\ \text { Investment in Reid } & &\$50,400\\\end{array}$

B.
$\begin{array}{llr} \text {Investment in Reid } &\$50,400\\ \text { Equity in income of Reid } & &\$50,400\\\end{array}$

C.
$\begin{array}{llr} \text { Equity in income of Reid } &\$15,120\\ \text {Investment in Reid } &&\$15,120\\\end{array}$

D.
$\begin{array}{llr} \text { Investment in Reid } &\$15,120\\ \text { Equity in income of Reid } &&\$15,120\\\end{array}$

• A)Entry A.
• B)Entry B.
• C)Entry C.
• D)Entry D.
• E)No entry is necessary.

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