Western Governors University ACCOUNTING C243 1) When there are intercompany sales of inventory during the year and a three-part consolidation worksheet is prepared, elimination entries related to the intercompany sales: Always are needed

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Western Governors University ACCOUNTING C243

1) When there are intercompany sales of inventory during the year and a three-part consolidation worksheet is prepared, elimination entries related to the intercompany sales:

0. 1. Always are needed.
   2. Are not needed if the entire inventory is resold to unrelated parties prior to the end of the year.
1. I
2. II
3. Both I and II
4. Either I or II

2. Earth Company owns 100 percent of the capital stock of both Mars Corporation and Venus Corporation. Mars purchases merchandise inventory from Venus at 125 percent of Venus's cost. During 20X8, Venus sold inventory to Mars that it had purchased for $25,000. Mars sold all of this merchandise to unrelated customers for $56,892 during 20X8. In preparing combined financial statements for 20X8, Earth's bookkeeper disregarded the common ownership of Mars and Venus.

Based on the information given above, what amount should be eliminated from cost of goods sold in the combined income statement for 20X8?

A. $31,250

B. $25,000

C. $56,892

D. $6,250

3. Earth Company owns 100 percent of the capital stock of both Mars Corporation and Venus Corporation. Mars purchases merchandise inventory from Venus at 125 percent of Venus's cost. During 20X8, Venus sold inventory to Mars that it had purchased for $25,000. Mars sold all of this merchandise to unrelated customers for $56,892 during 20X8. In preparing combined financial statements for 20X8, Earth's bookkeeper disregarded the common ownership of Mars and Venus.

Based on the information given above, by what amount was unadjusted revenue overstated in the combined income statement for 20X8?

A. $25,000

B. $56,892

C. $31,250

D. $6,250

4. Which of the following are examples of intercompany balances and transactions that must be eliminated in preparing consolidated financial statements?
   1. Security holdings
   2. Interest and dividends
   3. Sales and purchases

1. I, II
2. I, III
3. I, II, III
4. II

 

5. Senior Inc. owns 85 percent of Junior Inc. During 20X8, Senior sold goods with a 25 percent gross profit to Junior. Junior sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted?

1. No adjustment is necessary.
2. Sales and cost of goods sold should be reduced by 85 percent of the intercompany sales.
3. Net income should be reduced by 85 percent of the gross profit on intercompany sales.
4. Sales and cost of goods sold should be reduced by the intercompany sales.

6. During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary. The subsidiary also makes sales of inventory at a profit to its parent during the same year. Both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another. Consolidated revenues for the year should exclude:

1. 80 percent of the total revenues from intercompany sales.
2. total revenues from intercompany sales.
3. only the revenues from the subsidiary's intercompany sales.
4. only the revenues from the parent's intercompany sales.

7. Consolidated net income may include the parent's separate operating income plus the parent's share of the subsidiary's reported net income:

1. plus the unrealized profit on upstream intercompany sales of inventory made during the current year.
2. plus the profit realized this year from upstream intercompany sales of inventory made last year.
3. plus unrealized profit on downstream intercompany sales of inventory made during the current year.
4. minus the parent's share of profit realized this year from upstream intercompany sales of inventory made last year.

8. Perth Corporation owns 90 percent of Dundee Company's stock. At the end of 20X8, Perth and Dundee reported the following partial operating results and inventory balances:

Perth regularly prices its products at cost plus a 30 percent markup for profit. Dundee prices its sales at cost plus a 10 percent markup. The total sales reported by Perth and Dundee include both intercompany sales and sales to nonaffiliates.

Based on the information given above, what amount of sales will be reported in the consolidated income statement for 20X8?

A. $500,000

B. $850,000

C. $600,000

D. $800,000

 

9. 
   Perth Corporation owns 90 percent of Dundee Company's stock. At the end of 20X8, Perth and Dundee reported the following partial operating results and inventory balances:

Perth regularly prices its products at cost plus a 30 percent markup for profit. Dundee prices its sales at cost plus a 10 percent markup. The total sales reported by Perth and Dundee include both intercompany sales and sales to nonaffiliates.

Based on the information given above, what balance will be reported for inventory in the consolidated balance sheet for December 31, 20X8?

A. $56,573

B. $23,846

C. $32,727

D. $67,000

10. Consolidated net income for a parent and its 80 percent owned subsidiary should be computed by eliminating:

Aall unrealized profit in downstream intercompany inventory sales, and unrealized profit in upstream

. intercompany inventory sales made during the current year.

Ball unrealized profit in downstream intercompany inventory sales, and the noncontrolling interest's share

. of unrealized profit in upstream inventory sales made during the current year.

Cthe controlling interest's share of unrealized profit in downstream intercompany sales, and the

. controlling interest's share of unrealized profit in upstream sales made during the current year.

Dall unrealized profit in downstream intercompany sales, and the noncontrolling interest's share of

. unrealized profit in upstream sales made during the current year.

 

11. When a parent and its subsidiary use a periodic inventory system rather than a perpetual system, the income and asset balances reported in the consolidated financial statements are:
    1. affected only if there are upstream intercompany sales of inventory.
    2. affected only if there are downstream intercompany sales of inventory.

1. I
2. II
3. Both I and II
4. Neither I nor II

 

12. Global Corporation acquired 85 percent of Local Company's voting shares of stock in 20X7. During 20X8, Global purchased 50,000 picture tubes for $15 each and sold 28,000 of them to Local for $20 each. Local sold all of the units to unrelated entities prior to December 31, 20X8, for $30 each. Both companies use perpetual inventory systems.

 

Which worksheet eliminating entry is needed in preparing consolidated financial statements for 20X8 to remove all effects of the intercompany sale?

 

1. Option A
2. Option B
3. Option C
4. Option D

13. On January 1, 20X8, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the entire inventory to an unaffiliated company for

$120,000 on November 21, 20X8. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 20X8.

Based on the information given above, what amount of sales will be reported in the 20X8 consolidated income statement?

A. $62,000

B. $120,000

C. $90,000

D. $58,000

14. On January 1, 20X8, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the entire inventory to an unaffiliated company for

$120,000 on November 21, 20X8. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 20X8.

Based on the information given above, what amount of cost of goods sold will be reported in the 20X8 consolidated income statement?

A. $62,000

B. $120,000

C. $90,000

D. $58,000

 

15. On January 1, 20X8, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the entire inventory to an unaffiliated company for

$120,000 on November 21, 20X8. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 20X8.

Based on the information given above, what amount of consolidated net income will be assigned to the controlling shareholders for 20X8?

A. $58,000

B. $59,000

C. $55,000

D. $52,200

16. ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems.

Based on the information given above, what amount of cost of goods sold did ABC record in 20X8? A. $2,765,000

B. $1,620,000

C. $1,422,000

D. $2,963,000

17. ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems.

Based on the information given above, what amount of cost of goods sold did XYZ record in 20X8? A. $2,765,000

B. $1,620,000

C. $1,422,000

D. $2,963,000

18. ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems.

Based on the information given above, what amount of cost of goods sold must be reported in the consolidated income statement for 20X8?

A. $2,765,000

B. $1,620,000

C. $1,422,000

D. $2,963,000

19. ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems.

Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8?

A. $2,765,000

B. $1,620,000

C. $1,422,000

D. $2,963,000

 

20. ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems.

Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X9?

A. $187,000

B. $221,000

C. $1,422,000

D. $2,963,000

21. 
    Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows:

Assume Push sold the inventory to Shove. Using the fully adjusted equity method, what journal entry would be recorded by Push to defer the unrealized gross profit on inventory sales to Shove in 20X1?

1. Option A
2. Option B
3. Option C
4. Option D

 

22. 
    Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows:

Assume Shove sold the inventory to Push. Using the fully adjusted equity method, what journal entry would be recorded by Push to defer the unrealized gross profit on inventory sales to Shove in 20X1?

1. Option A
2. Option B
3. Option C
4. Option D

23. 
    Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows:

Assume Push sold the inventory to Shove. Using the fully adjusted equity method, what journal entry would be recorded by Push to recognize the realization of the 20X1 deferred intercompany profit and to defer the 20X2 unrealized gross profit on inventory sales to Shove?

1. Option A
2. Option B
3. Option C
4. Option D

 

24. 
    Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows:

Assume Shove sold the inventory to Push. Using the fully adjusted equity method, what journal entry would be recorded by Push to recognize the realization of the 20X1 deferred intercompany profit and to defer the 20X2 unrealized gross profit on inventory sales to Shove?

1. Option A
2. Option B
3. Option C
4. Option D

25. Note: This is a Kaplan CPA Review Question

 

Selected information from the separate and consolidated balance sheets and income statements of Pare, Inc. and its subsidiary, Shel Co., as of December 31, 20X5, and for the year then ended is as follows:

 

Additional information:    

During 20X5, Pare sold goods to Shel at the same markup on cost that Pare uses for all sales. What was the amount of intercompany sales from Pare to Shel during 20X5?

A. $12,000

B. $6,000

C. $64,000

D. $58,000

 

26. Note: This is a Kaplan CPA Review Question

 

Selected information from the separate and consolidated balance sheets and income statements of Pare, Inc. and its subsidiary, Shel Co., as of December 31, 20X5, and for the year then ended is as follows:

 

Additional information:    

During 20X5, Pare sold goods to Shel at the same markup on cost that Pare uses for all sales.

At December 31, 20X5, what was the amount of Shel's payable to Pare for intercompany sales? A. $12,000

B. $6,000

C. $58,000

D. $64,000

27. Note: This is a Kaplan CPA Review Question

 

Selected information from the separate and consolidated balance sheets and income statements of Pare, Inc. and its subsidiary, Shel Co., as of December 31, 20X5, and for the year then ended is as follows:

 

Additional information:    

During 20X5, Pare sold goods to Shel at the same markup on cost that Pare uses for all sales.

In Pare's consolidating worksheet, what amount of unrealized intercompany profit was eliminated? A. $12,000

B. $6,000

C. $58,000

D. $64,000

 

28. Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of Scrooge Corporation. Pilfer purchased inventory from Scrooge for $90,000 on August 20, 20X8, and

resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100,000. Scrooge produced the inventory sold to Pilfer for $67,000. The companies had no other transactions during 20X8.

Based on the information given above, what amount of sales will be reported in the 20X8 consolidated income statement?

A. $90,000

B. $120,000

C. $100,000

D. $67,000

29. Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of Scrooge Corporation. Pilfer purchased inventory from Scrooge for $90,000 on August 20, 20X8, and

resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100,000. Scrooge produced the inventory sold to Pilfer for $67,000. The companies had no other transactions during 20X8.

Based on the information given above, what amount of cost of goods sold will be reported in the 20X8 consolidated income statement?

A. $60,900

B. $90,000

C. $46,900

D. $67,000

30. Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of Scrooge Corporation. Pilfer purchased inventory from Scrooge for $90,000 on August 20, 20X8, and

resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100,000. Scrooge produced the inventory sold to Pilfer for $67,000. The companies had no other transactions during 20X8.

Based on the information given above, what amount of consolidated net income will be assigned to the controlling interest for 20X8?

A. $51,490

B. $53,100

C. $37,000

D. $20,100

31. Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of Scrooge Corporation. Pilfer purchased inventory from Scrooge for $90,000 on August 20, 20X8, and

resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100,000. Scrooge produced the inventory sold to Pilfer for $67,000. The companies had no other transactions during 20X8.

Based on the information given above, what inventory balance will be reported by the consolidated entity on December 31, 20X8?

A. $51,490

B. $53,100

C. $37,000

D. $20,100

 

32. 
    Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows:

Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

Based on the information given above, what will be the consolidated net income for 20X6? A. $357,500

B. $375,000

C. $490,000

D. $317,750

33. 
    Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows:

Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

Based on the information given above, what will be the consolidated net income for 20X7? A. $495,000

B. $317,750

C. $486,250

D. $690,000

 

34. 
    Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows:

Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

Based on the information given above, what will be the income assigned to controlling interest for 20X7?

 

A. $448,375

B. $495,000

C. $486,250

D. $615,375

35. 
    Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows:

Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

Based on the information given above, what will be the income to noncontrolling interest for 20X8? A. $39,750

B. $37,875

C. $71,275

D. $70,875

 

36. 
    Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub. The incomes reported by the companies over the past three years are as follows:

Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6, 20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000, $157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70 percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

Based on the information given above, what will be the income to controlling interest for 20X8? A. $615,375

B. $686,250

C. $690,000

D. $694,000

37. A newly created subsidiary sold all of its inventory to its parent at a profit in its first year of existence. The parent, in turn, sold all but 20 percent of the inventory to unaffiliated companies, recognizing a profit. The parent had no other sales during the year. The amount that should be reported as cost of goods sold in the this year's consolidated income statement should be:

1. 80 percent of the amount reported as intercompany sales by the subsidiary.
2. 80 percent of the amount reported as cost of goods sold by the subsidiary.
3. the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of the parent.
4. 80 percent of the amount reported as cost of goods sold by the parent.

38. Note: This is a Kaplan CPA Review Question

Clark Co. had the following transactions with affiliated parties during 20X1:

 

• Sales of $60,000 to Dean, Inc., with $20,000 gross profit. Dean had $15,000 of this inventory on hand at year end. Clark owns a 15% interest in Dean and does not exert significant influence.
• Purchases of raw materials totaling $240,000 from Kent Corp., a wholly-owned subsidiary. Kent's gross profit on the sale was $48,000. Clark had $60,000 of this inventory remaining on December 31, 20X1.

Before eliminating entries, Clark had consolidated current assets of $320,000. What amount should Clark report in its December 31, 20X1, consolidated balance sheet for current assets?

A. $303,000

B. $320,000

C. $317,000

D. $308,000

 

39. Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock. During 20X8, Parent sold inventory purchased in 20X7 for $48,000 to Subsidiary 1 for

$60,000. Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2. Prior to December 31, 20X8, Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31, 20X8.

Based on the information given above, what amount should be reported in the 20X8 consolidated income statement as cost of goods sold?

A. $36,000

B. $12,000

C. $48,000

D. $45,000

40. Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock. During 20X8, Parent sold inventory purchased in 20X7 for $48,000 to Subsidiary 1 for

$60,000. Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2. Prior to December 31, 20X8, Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31, 20X8.

Based on the information given above, what amount should be reported in the December 31, 20X8, consolidated balance sheet as inventory?

A. $36,000

B. $12,000

C. $15,000

D. $28,000

41. Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock. During 20X8, Parent sold inventory purchased in 20X7 for $48,000 to Subsidiary 1 for

$60,000. Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2. Prior to December 31, 20X8, Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31, 20X8.

Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8?

A. $117,000

B. $120,000

C. $150,000

D. $128,000

42. Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock. During 20X8, Parent sold inventory purchased in 20X7 for $48,000 to Subsidiary 1 for

$60,000. Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2. Prior to December 31, 20X8, Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31, 20X8.

Based on the information given above, what amount of sales must be eliminated from the consolidated income statement for 20X8?

A. $117,000

B. $120,000

C. $150,000

D. $128,000

 

43. Parent Corporation owns 90 percent of Subsidiary 1 Company's stock and 75 percent of Subsidiary 2 Company's stock. During 20X8, Parent sold inventory purchased in 20X7 for $48,000 to Subsidiary 1 for

$60,000. Subsidiary 1 then sold the inventory at its cost of $60,000 to Subsidiary 2. Prior to December 31, 20X8, Subsidiary 2 sold $45,000 of inventory to a nonaffiliate for $67,000 and held $15,000 in inventory at December 31, 20X8.

Based on the information given above, what amount of inventory must be eliminated from the consolidated balance sheet for 20X8?

A. $2,400

B. $9,000

C. $12,000

D. $3,000

44. The consolidation treatment of profits on inventory transfers that occurred before the business combination depends on whether:
    1. the companies were independent at that time.
    2. the sale transaction was the result of arm's-length bargaining.

1. I
2. II
3. Both I and II
4. Neither I nor II

45. Elvis Company purchases inventory for $70,000 on Mar 19, 20X8 and sells it to Graceland Corporation for $95,000 on May 14, 20X8. Graceland still holds the inventory on December 31, 20X8, and determines that its market value (replacement cost) is $82,000 at that time. Graceland writes the inventory down from $95,000 to its lower market value of $82,000 at the end of the year. Elvis owns 75 percent of Graceland.

Based on the information given above, what amount of cost of goods sold should be eliminated in the consolidation worksheet for 20X8?

A. $82,000

B. $70,000

C. $95,000

D. $60,000

46. Elvis Company purchases inventory for $70,000 on Mar 19, 20X8 and sells it to Graceland Corporation for $95,000 on May 14, 20X8. Graceland still holds the inventory on December 31, 20X8, and determines that its market value (replacement cost) is $82,000 at that time. Graceland writes the inventory down from $95,000 to its lower market value of $82,000 at the end of the year. Elvis owns 75 percent of Graceland.

Based on the information given above, what amount of inventory should be eliminated in the consolidation worksheet for 20X8?

A. $15,000

B. $14,000

C. $12,000

D. $13,000