Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

Question

Quizplus · Accepted Answer

The inventory account is credited to defer the unrecognized intra-entity gross profit because the profit is included in the ending inventory that remains unsold at the end of the year.

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