Deferred intercompany inventory profitsAssume on May 15, 2019, a parent company purchased a 75% interest in a subsidiary's voting common stock. During the year ended December 31, 2022, the subsidiary soldmerchandise to the parent for $972,000 Before consolidation, the parent and subsidiary earn the same profits on intercompany sales as they earn on sales to unaffiliated customers.The parent's gross profit percentage is 35% and the subsidiary's is 30% On December 31, 2022, 40% of this merchandise was in the parent's ending inventory. What amount ofintercompany profit in ending inventory must be deferred in preparation of the December 31, 2022 consolidated financial statements?Select one:6 a. $388,800 xb. $116,640c. $87,480d. $136,080

Introduction:- A parent company is an entity that controls one or more entities (Subsidiary…

ferred intercompany inventory profits sume on May 15, 2019, a parent company purchased a 75% interest in a subsidiary's voting common stock. During the year ended December 31, 2022, the subsidian erchandise to the parent for $972,000 Defore consolidation, the parent and subsidiary earn the same profiks on intercompany sales as they earn on sales to unalia e parent's gross profit percentage is 35% and the subsidiary's is 30% On December 31, 2022, 40% of this merchandise was in the parent's ending inventory. What an ercompany profit in ending inventory must be deferred in preparation of the December 31, 2022 consolidated financial statements? lect one: a $388,800x b. $116,640 $87,480 d. $136,080

ferred intercompany inventory profits sume on May 15, 2019, a parent company purchased a 75% interest in a subsidiary's voting common stock. During the year ended December 31, 2022, the subsidian erchandise to the parent for $972,000 Defore consolidation, the parent and subsidiary earn the same profiks on intercompany sales as they earn on sales to unalia e parent's gross profit percentage is 35% and the subsidiary's is 30% On December 31, 2022, 40% of this merchandise was in the parent's ending inventory. What an ercompany profit in ending inventory must be deferred in preparation of the December 31, 2022 consolidated financial statements? lect one: a $388,800x b. $116,640 $87,480 d. $136,080

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Deferred intercompany inventory profits
Assume on May 15, 2019, a parent company purchased a 75% interest in a subsidiary's voting common stock. During the year ended December 31, 2022, the subsidiary sold
merchandise to the parent for $972,000 Before consolidation, the parent and subsidiary earn the same profits on intercompany sales as they earn on sales to unaffiliated customers.
The parent's gross profit percentage is 35% and the subsidiary's is 30% On December 31, 2022, 40% of this merchandise was in the parent's ending inventory. What amount of
intercompany profit in ending inventory must be deferred in preparation of the December 31, 2022 consolidated financial statements?
Select one:
6 a. $388,800 x
b. $116,640
c. $87,480
d. $136,080

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