Question
In Year 1, Parent sold Sub inventory for $100 ($80 COGS). Sub did not sell any of the inventory to outside parties. Parent uses Equity
In Year 1, Parent sold Sub inventory for $100 ($80 COGS). Sub did not sell any of the inventory to outside parties. Parent uses Equity Method accounting and there was no other transaction between the parent and the sub or with any outside party during year 1. In Year 2, the sub sold the $100 inventory bought from parent (parent COGS was $80) to an outside party for $130. No other transaction has occurred for the parent or the sub.
Required: 1) What are the beginning and ending balance of Equity Investment account before consolidation for year 2?
2) Provide the consolidation journal entries (C and I entry) for year 2.
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