In May 2020, a parent sold inventories to a subsidiary entity for $60 000. The inventories had previously cost the parent entity $48 000. The entire inventory is still held by the subsidiary at reporting date, 30 June 2020. Ignoring tax effects, which of the following is the adjustment entry in the consolidation worksheet at reporting date? a. Cash Dr 48 000 Sales revenue Cr 48 000 Cost of sales Dr 48 000 Inventories Cr 48 000 b. Sales revenue Dr 48 000 Cash Cr 48 000 Inventories Dr 48 000 Cost of sales Cr 48 000 c. Cost of sales Dr 60 000 Sales revenue Cr 12 000 Inventories Cr 48 000 d. Sales revenue Dr 60 000 Cost of sales Cr 48 000 Inventories Cr 12 000
In May 2020, a parent sold inventories to a subsidiary entity for $60 000. The inventories had previously cost the parent entity $48 000. The entire inventory is still held by the subsidiary at reporting date, 30 June 2020. Ignoring tax effects, which of the following is the adjustment entry in the consolidation worksheet at reporting date? a. Cash Dr 48 000 Sales revenue Cr 48 000 Cost of sales Dr 48 000 Inventories Cr 48 000 b. Sales revenue Dr 48 000 Cash Cr 48 000 Inventories Dr 48 000 Cost of sales Cr 48 000 c. Cost of sales Dr 60 000 Sales revenue Cr 12 000 Inventories Cr 48 000 d. Sales revenue Dr 60 000 Cost of sales Cr 48 000 Inventories Cr 12 000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
- In May 2020, a parent sold inventories to a subsidiary entity for $60 000. The inventories had previously cost the parent entity $48 000. The entire inventory is still held by the subsidiary at reporting date, 30 June 2020. Ignoring tax effects, which of the following is the
adjustment entry in the consolidation worksheet at reporting date?
|
a. |
Cash |
Dr |
48 000 |
|
|
|
Sales revenue |
Cr |
|
48 000 |
|
|
Cost of sales |
Dr |
48 000 |
|
|
|
Inventories |
Cr |
|
48 000 |
|
|
|
|
|
|
|
b. |
Sales revenue |
Dr |
48 000 |
|
|
|
Cash |
Cr |
|
48 000 |
|
|
Inventories |
Dr |
48 000 |
|
|
|
Cost of sales |
Cr |
|
48 000 |
|
c. |
Cost of sales |
Dr |
60 000 |
|
|
|
Sales revenue |
Cr |
|
12 000 |
|
|
Inventories |
Cr |
|
48 000 |
|
|
|
|
|
|
|
d. |
Sales revenue |
Dr |
60 000 |
|
|
|
Cost of sales |
Cr |
|
48 000 |
|
|
Inventories |
Cr |
|
12 000 |
|
|
|
|
|
|
|
|
|
|
|
|
Answer (write your correct choice):
Expert Solution
Step 1
CONSOLIDATED JOURNAL ENTRY
Under the consolidation method, the accounting statement merges together financial entries of the parent company and its subsidiaries with the necessary elimination of entries so as to avoid overlapping of data.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education