REFERENCE: Ref.05_04 Walsh Company Sells Inventory to Its Subsidiary,Fisher Company,at a Profit

question 42

Multiple Choice

REFERENCE: Ref.05_04
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2009.Walsh uses the equity method to account for its investment in Fisher.
-With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 2009?

• A)Retained earnings.
• B)Cost of goods sold.
• C)Inventory.
• D)Investment Fisher Company.
• E)Additional paid-in capital.

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Definitions:

Fixed Expenses

Fixed expenses are costs that do not change with the volume of output, such as rent or salaries, providing stability in financial planning but requiring effective budget management.

Net Income

The total profit of a company after deducting all expenses, taxes, and losses, indicating its financial performance over a period.

Total Expenses

The sum of all costs and expenses incurred by a business during a specific period, including operating expenses and cost of goods sold.

Direct Materials

Raw materials that can be directly linked to the production of specific goods or services.