Partner, Inc. owns 80% of Senior, Inc. During 2020, Partner sold goods with a 40% gross profit to Senior. Senior sold all of these goods in 2020. For 2020 consolidated financial statements, how should the summation of Partner and Senior income statement items be adjusted? A. No adjustment is necessary since the inventory was sold 100% to outsider. B. Sales and cost of goods sold should be reduced by the intercompany sales. C. Sales and cost of goods sold should be reduced by 80% of the intercompany sales. D. Net income should be reduced by 80% of the gross profit on intercompany sales.
Partner, Inc. owns 80% of Senior, Inc. During 2020, Partner sold goods with a 40% gross profit to Senior. Senior sold all of these goods in 2020. For 2020 consolidated financial statements, how should the summation of Partner and Senior income statement items be adjusted? A. No adjustment is necessary since the inventory was sold 100% to outsider. B. Sales and cost of goods sold should be reduced by the intercompany sales. C. Sales and cost of goods sold should be reduced by 80% of the intercompany sales. D. Net income should be reduced by 80% of the gross profit on intercompany sales.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Partner, Inc. owns 80% of Senior, Inc. During 2020, Partner sold goods with a 40% gross profit to Senior. Senior sold all of these goods in 2020. For 2020 consolidated financial statements, how should the summation of Partner and Senior income statement items be adjusted?
A. No adjustment is necessary since the inventory was sold 100% to outsider.
B. Sales and cost of goods sold should be reduced by the intercompany sales.
C. Sales and cost of goods sold should be reduced by 80% of the intercompany sales.
D. Net income should be reduced by 80% of the gross profit on intercompany sales.
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