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

question 14

Multiple Choice

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2010. 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 2010, which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory?

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

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Definitions:

Discounted Payback Rule

A capital budgeting technique that determines the amount of time required for discounted cash flows from a project to repay the initial investment.

Pre-Specified Period

A defined time frame agreed upon or determined before the start of a certain process or event.

Discounted Payback Period

The time it takes to break even from an investment based on the present value of its cash flows.

Projects

Specific tasks or endeavors undertaken by individuals or organizations to achieve particular goals, often involving a series of planned actions or steps.