1. A subsidiary sells merchandise to its parent at a markup of 25% on cost. In 2014, the parent paid $750,000 for merchandise received from the subsidiary. By year-end 2014, the parent has sold $500,000 of the merchandise to outside customers for $800,000, but still holds the other $250,000 in its ending inventory. Which statement is false concerning the information reported on the 2014 consolidated financial statements?

A. Consolidated sales are $800,000

B. Consolidated cost of goods sold is $500,000

C. Consolidated ending inventory is $200,000

D. Eliminating entries on the 2014 working paper reduce cost of goods sold by $700,000

2. A subsidiary sells merchandise to its parent at a markup of 30% on cost. In 2014, the parent paid $1,040,000 for merchandise received from the subsidiary. By year-end 2014, the parent has sold $780,000 of the merchandise to outside customers for $850,000, but still holds the other $260,000 in its ending inventory. Which statement is true concerning the information reported on the 2014 consolidated financial statements?

A. Consolidated sales should be $1,040,000

B. The consolidated ending inventory balance should be $200,000

C. Consolidated cost of goods sold should be $780,000

D. Consolidated cost of goods sold should be $800,000

3.ON January 1, 2014, the parent sold new equipment for which it paid $600,000 to the subsidiary for $1,000,000. The plant assets had a remaining life of 10 years at that time, straight-line. The subsidiary still has the equipment at year-end. On the consolidation working paper, the net effect of eliminations I will be a

A. Credit accumulated depreciation for $60,000

B. Credit depreciation expense for $40,000

C. Credit equipment for $600,000

D. Credit gain on sale of equipment for $400,000