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

question 66

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, 2012. 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 cost of goods sold for the 2014 consolidation worksheet with regard to the unrealized gross profit of the 2014 intra-entity transfer of merchandise?

• A) $600.
• B) $750.
• C) $3,760.
• D) $3,000.
• E) $675.

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Definitions:

Underwriting Securities

The process by which investment banks and other financial entities agree to buy and sell securities to the public, assuming the risk of selling them.

Syndicate

A group of individuals or organizations combined to promote some common interest, often used in reference to underwriting groups for securities offerings.