Assume on May 15, 2016, a parent company purchased a 75% interest in a subsidiary’s voting com-mon stock. During the year ended December 31, 2019, the subsidiary sold merchandise to the parent for $780,000. Before consolidation, the parent and subsidiary earn the same profits on intercompany sales as they earn on sales to unaffiliated customers. The parent’s gross profit percentage is 35% and the subsidiary’s is 30%. On December 31, 2019, 40% of this merchandise was in the parent’s ending inventory. What amount of intercompany profit in ending inventory must be deferred in preparation of the December 31, 2019 consolidated financial statements? a. $70,200 b. $109,200c. $312,000 d. $93,600
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Assume on May 15, 2016, a parent company purchased a 75% interest in a subsidiary’s voting com-mon s...
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