A Newly Created Subsidiary Sold All of Its Inventory to Its

question 64

Multiple Choice

A newly created subsidiary sold all of its inventory to its parent at a profit in its first year of existence.The parent,in turn,sold all but 20 percent of the inventory to unaffiliated companies,recognizing a profit.The parent had no other sales during the year.The amount that should be reported as cost of goods sold in this year's consolidated income statement should be:

• A)80 percent of the amount reported as intercompany sales by the subsidiary.
• B)80 percent of the amount reported as cost of goods sold by the subsidiary.
• C)the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of the parent.
• D)80 percent of the amount reported as cost of goods sold by the parent.

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Definitions:

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