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

question 33

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 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:

Erosion

A natural process where material from the Earth's surface is worn away by natural agents such as water, wind, or ice.

Lithosphere

The outermost layer of the Earth, comprising the crust and the uppermost part of the mantle, which is rigid and brittle.

Abyssal Plain

Large, flat areas of the deep ocean floor, situated between continental margins and mid-ocean ridges, covered with fine sediment.

Mid-Ocean Ridge

An underwater mountain range formed by plate tectonics, characterized by volcanic activity and new seafloor formation.