Strickland Company Sells Inventory to Its Parent, Carter Company, at a Profit

question 119

Multiple Choice

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. In the consolidation worksheet for 2011, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales?

• A) Retained earnings.
• B) Cost of goods sold.
• C) Inventory.
• D) Investment in Strickland Company.
• E) Sales.

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Definitions:

Service Department

A division within a company that performs supportive functions for other departments, such as maintenance, accounting, or human resources, but does not directly contribute to production.

Wholesaling Department

A department within a company responsible for selling products in bulk to retailers or other distributors, rather than directly to consumers.

Employee Hours

The total number of hours worked by employees, often used for payroll calculations, productivity analysis, and operational planning.

Space Occupied

The area or volume utilized by an entity or operation within a physical location.