Tiberend, Inc., sold $147,000 in inventory to Schilling Company during 2017 for $245,000. Schilling resold $109,000 of this merchandise in 2017 with the remainder to be disposed of during 2018. Assuming that Tiberend owns 34 percent of Schilling and applies the equity method, what journal entry is recorded at the end of 2017 to defer the intra-entity gross profit

intra entity unrealized gross profit is $18496

Explanation:

given data

inventory = $147,000

sold = $245,000

resold = $109,000

Tiberend owns = 34 percent

solution

we get here first gross profit of tiberend that is

gross profit of tiberend = $245,000 - $147,000

gross profit of tiberend = $98000

and gross profit ratio will be as

gross profit ratio =  

gross profit ratio =  

gross profit ratio = 40%

and

ending inventory with schilling is = $245,000 - $109,000

ending inventory with schilling is $136000

so total unrealized profit will be

total unrealized profit = 136000 × 40%

total unrealized profit = $54400

and

intra entity unrealized gross profit is  = total unrealized profit × Tiberend ownership

intra entity unrealized gross profit is  = $54400  × 34%

intra entity unrealized gross profit is $18496

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