Question

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2012. One-third of the inventory is sold by Carter in 2012.In the consolidation worksheet for 2012, which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory? A. Retained earnings.B. Cost of goods sold.C. Inventory.D. Investment in Strickland Company.E. Sales.

Answer 1

Answer: Cost of goods sold would be a debit entry to eliminate the intra-entity transfer of inventory.

Cost of goods sold is known as the direct costs ascribable to the production of the commodity sold in a organization. This considers the cost of the materials that has been substantially used in making the commodity including the labor costs.

Therefore, the correct option is (b)