Question

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. 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 2012, which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory?
A. Retained earnings.B. Cost of goods sold.C. Inventory.D. Investment in Fisher Company.E. Sales.

Answer 1

Answer:

A. Retained earnings

Explanation:

At the end of the period, the temporary accounts are closed, their balance is transfer to retained earnings, so the COGS and the sales revenue involved in the intra-entity transfer are contained in the retained earnings account