A Subsidiary Sold Inventory to Its Parent for $40 000

question 5

Multiple Choice

A subsidiary sold inventory to its parent for $40 000.The inventory originally cost the subsidiary $32 000.At balance sheet date,the parent had 20% of the inventory still on hand.The consolidation adjustment entry (excluding tax effects) will eliminate unrealised profit amounting to:

• A)$6400.
• B)$1600.
• C)$8000.
• D)$9600.

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Definitions:

Bid Rotation

A form of collusion in auction markets where participants take turns being the lowest bidder to ensure each wins a proportion of contracts over time.

Cartels

Organizations or associations of producers or suppliers formed to maintain prices at a high level and restrict competition.

Auctions

Competitive bidding processes where goods or services are sold to the highest bidder.

Winner's Curse

The tendency of auction winners to have paid more than the item's actual value, often due to competitive bidding and overestimation of worth.