Walsh Company Sells Inventory to Its Subsidiary, Fisher Company, at a Profit

question 42

Multiple Choice

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher.
In the consolidation worksheet for 2013, which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2012 intra-entity sales?

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

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Definitions:

Independent Contractors

Individuals or companies hired to perform specific tasks for a business but are not considered employees.

Agents

Individuals or entities authorized to act on behalf of another person or organization in business or legal matters.

Employees

Individuals who are hired by an employer to perform specific duties or services in exchange for remuneration, forming the workforce of a company or organization.

Principal

In legal and financial contexts, the main party to a transaction or the original amount of money invested or loaned, before interest.