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6 January, 22:15

James Corporation owns 80 percent of Carl Corporation's common stock. During October, Carl sold merchandise to James for $250,000. At December 31, 40 percent of this merchandise remains in James's inventory. Gross profit percentages were 20 percent for James and 30 percent for Carl. The amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process isa. $24,000b. $30,000c. $20,000d. $75,000

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  1. 6 January, 22:41
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    unrealised profit on unsold stock with james corporation = $30000

    so correct option is b. $30,000

    Explanation:

    owns = 80 %

    sold = $250,000

    inventory = 40 %

    Gross profit = 20 %

    Gross profit = 30 %

    amount of intra entity gross profit

    solution

    unsold stock with james corporation are = 40 % of $250000

    unsold stock with james corporation = $100,000

    and

    unrealised profit on unsold stock with james corporation is in consolidated statement is = unsold stock with james corporation * profit rate i. e 30%

    unrealised profit on unsold stock with james corporation = $100000 * 30%

    unrealised profit on unsold stock with james corporation = $30000

    so correct option is b. $30,000
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