Scarlet Company owns 80% of Tamara Corp.'s common stock. During October 2019 Tamara sold merchandise to Scarlet for 125,000. At December 31, 2019, one-half of the merchandise remained in Scarlet inventory. For 2019, gross profit percentages were 30% for Scarlet and 40% for Tamara. The amount of unrealized intercompany profit in ending inventory at December 31, 2019 that should be eliminated in consolidation is: 20,000 O 18,750 O 25,000 50,000

Scarlet Company owns 80% of Tamara Corp.'s common stock. During October 2019 Tamara sold merchandise to Scarlet for 125,000. At December 31, 2019, one-half of the merchandise remained in Scarlet inventory. For 2019, gross profit percentages were 30% for Scarlet and 40% for Tamara. The amount of unrealized intercompany profit in ending inventory at December 31, 2019 that should be eliminated in consolidation is: 20,000 O 18,750 O 25,000 50,000

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

Scarlet Company owns 80% of Tamara Corp.'s common stock. During October
2019 Tamara sold merchandise to Scarlet for 125,000. At December 31, 2019,
one-half of the merchandise remained in Scarlet inventory. For 2019, gross profit
percentages were 30% for Scarlet and 40% for Tamara. The amount of unrealized
intercompany profit in ending inventory at December 31, 2019 that should be
eliminated in consolidation is:
O 20,000
O 18,750
O 25,000
O 50,000

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