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

question 13

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 2010, which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory?

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

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Definitions:

Credit Sales

Sales where the customer is allowed to pay for the product or service at a later date, extending credit.

Bad Debt Expense

The estimated amount of accounts receivable that is not expected to be collected.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that may not be collectible, reflecting potential losses due to credit sales.

Uncollectible Receivables

Debts owed to a company that are considered unlikely to be paid by the debtor.