Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.
For consolidation purposes, what amount would be debited to cost of goods sold for the 2012 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise?
A) $300.
B) $240.
C) $2,000.
D) $1,600.
E) $270.

Question

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012.  Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. 
For consolidation purposes, what amount would be debited to cost of goods sold for the 2012 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise?
A) $300. 
B) $240. 
C) $2,000. 
D) $1,600. 
E) $270.

Quizplus · Accepted Answer

Earnings Adjustment for Unrealized Gains of Sub 2012 ($1,200 × .25) = $300

Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells