Wendy Marvel sold $260,000 of its inventory to Carla during 2021 for $400,000. Carla sold $300,000 of this merchandise in 2021 with the remainder to be disposed of during 2022. Assume Wendy Marvel owns 35% of Carla and has the ability to exert significant influence over Carla. What journal entry will be recorded at the end of 2021 to defer the recognition of the investor's share of the intra- entity gross profits?

Wendy Marvel sold $260,000 of its inventory to Carla during 2021 for $400,000. Carla sold $300,000 of this merchandise in 2021 with the remainder to be disposed of during 2022. Assume Wendy Marvel owns 35% of Carla and has the ability to exert significant influence over Carla. What journal entry will be recorded at the end of 2021 to defer the recognition of the investor's share of the intra- entity gross profits?

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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Question

Wendy Marvel sold $260,000 of its inventory to Carla during 2021 for $400,000. Carla sold $300,000 of this
merchandise in 2021 with the remainder to be disposed of during 2022. Assume Wendy Marvel owns 35% of
Carla and has the ability to exert significant influence over Carla.
What journal entry will be recorded at the end of 2021 to defer the recognition of the investor's share of the intra-
entity gross profits?
A) Equity in Carla
B)
C)
D)
Investment in Carla
Investment in Carla
Equity in Carla
Equity in Carla
Investment in Carla
Investment in Carla
Equity in Carla
$35,000
$35,000
$12,250
$12,250
35,000
$35,000
$12,250
$12,250

O
O
O
O
о
Entry D.
Entry B.
No entry is necessary or correct entry not shown
Entry A.
Entry C.

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