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

question 83

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 2011, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales?

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

Recognize and categorize extraordinary and infrequent items in financial statements according to GAAP.

Understand the principles and implications of changes in accounting principles and estimates.

Identify and explain the components and importance of comprehensive income.

Recognize prior period adjustments and their impact on financial statements.

---

Definitions:

Autonomic Nervous Systems

The part of the nervous system responsible for control of the bodily functions not consciously directed, such as breathing, the heartbeat, and digestive processes.

Somatic Nervous System

A component of the peripheral nervous system that controls voluntary movements of the body by innervating skeletal muscles.

Sensory Receptors

Cells or organs specialized to detect external stimuli from the environment and convert them into neural signals for processing by the nervous system.

Serotonin Agonist

A type of drug that mimics the effects of serotonin, a neurotransmitter, by stimulating its receptors in the brain, often used to treat depression and other mood disorders.