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

question 71

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 credit 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 Fisher Company.
• E) Sales.

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Definitions:

Expected Frequencies

The theoretically predicted count of occurrences in each category of a contingency table under the assumption that the null hypothesis is true.

Chi-Square Distribution

A probability distribution that is used to test hypotheses about the variance of a population and the distribution of categorical variables.

Categories

Distinctive groups or classes into which items, individuals, or concepts are divided based on shared characteristics or attributes.

Multinomial Experiment

An experiment that leads to outcomes categorized into more than two independent and mutually exclusive categories.