Companies A,B and C are all part of the one economic entity,but are all separate legal entities required to prepare their own financial statements.Company A sold Company B's inventory that cost $56 000 for $78 000.At the end of the same period Company B has three-quarters of that inventory still on hand and the rest has been sold to an entity outside the economic group.At what amount should the inventory remaining in Company B be recorded in Company B's own financial statements?
A) $42 000
B) $58 500
C) $56 000
D) $14 625

Question

Quizplus · Accepted Answer

Since Company A sold Company B's inventory for $78,000, the cost of the inventory for Company B was $56,000. Three-quarters of the inventory is still on hand, which means that the remaining inventory cost is 3/4 * $56,000 = $42,000. Therefore, the inventory remaining in Company B should be recorded at a cost of $42,000 in Company B's own financial statements.

Companies A,B and C Are All Part of the One