A subsidiary sells merchandise to its parent at a markup of 25% on cost. In...
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Accounting
A subsidiary sells merchandise to its parent at a markup of 25% on cost. In the current year, the parent had $75,000 in merchandise purchased from the subsidiary in its beginning inventory. During the current year, the parent paid $750,000 for merchandise from the subsidiary. By year-end, the parent has sold $700,000 of merchandise purchased from the subsidiary to outside customers for $900,000. How do the consolidation working paper eliminating entries affect cost of goods sold?
| A. | net credit of $725,000 | |
| B. | net credit of $740,000 | |
| C. | net credit of $765,000 | |
| D. | net credit of $750,000 |
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