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

question 26

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:

Retrospective Adjustment

A change made to the accounting records to correct an error or to apply a different accounting policy as if it had always been applied.

Net Impact

The overall effect of transactions or events on the financial position of a company, often considered in decision-making and reports.

Accounting Principle

Fundamental guidelines or rules that govern the accounting practices and financial reporting of companies.

Accounting Estimate

An approximation of a monetary amount in the absence of a precise means of measurement.