Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells

question 76

Multiple Choice

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2010.

Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2012 consolidation worksheet entry with regard to the unrealized gross profit of the 2011 intra-entity transfer of merchandise?

• A) $3,000.
• B) $2,400.
• C) $1,000.
• D) $800.
• E) $900.

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Definitions:

Inventory

The raw materials, work-in-progress products, and finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.

Price Decline

Price decline refers to a decrease in the value or cost of an asset or commodity over a period, often influenced by market conditions or changes in supply and demand.

Write Down

The reduction in the book value of an asset when its fair market value has fallen below its current book value.

Accountants

Professionals who perform accounting functions such as audits or financial statement analysis according to prescribed methods.