Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows:...
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Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows:
| Year | Inventory Cost | Transfer Price | Inventory Remaining at Year End (at transfer price) |
| 20X1 | $80,000 | $100,000 | $30,000 |
| 20X2 | $110,000 | $130,000 | $26,00 |
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?
| A. | Income from Shove Company | 6,000 | |
| Investment in Shove Company | 6,000 | ||
| B. | Income from Shove Company | 3,600 | |
| Investment in Shove Company | 3,600 | ||
| C. | Investment in Shove Company | 6,000 | |
| Income from Shove Company | 6,000 | ||
| D. | Investment in Shove Company | 3,600 | |
| Income from Shove Company | 3,600 |
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?
| A. | Income from Shove Company | 6,000 | |
| Investment in Shove Company | 6,000 | ||
| B. | Income from Shove Company | 3,600 | |
| Investment in Shove Company | 3,600 | ||
| C. | Investment in Shove Company | 6,000 | |
| Income from Shove Company | 6,000 | ||
| D. | Investment in Shove Company | 3,600 | |
| Income from Shove Company | 3,600 |
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?
| A. | Income from Shove Company | 2,000 | |
| Investment in Shove Company | 2,000 | ||
| B. | Income from Shove Company | 1,200 | |
| Investment in Shove Company | 1,200 | ||
| C. | Investment in Shove Company | 2,000 | |
| Income from Shove Company | 2,000 | ||
| D. | Investment in Shove Company | 1,200 | |
| Income from Shove Company | 1,200 |
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?
| A. | Income from Shove Company | 2,000 | |
| Investment in Shove Company | 2,000 | ||
| B. | Income from Shove Company | 1,200 | |
| Investment in Shove Company | 1,200 | ||
| C. | Investment in Shove Company | 2,000 | |
| Income from Shove Company | 2,000 | ||
| D. | Investment in Shove Company | 1,200 | |
| Income from Shove Company | 1,200 |
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