Question
Morneau Company, a 100% owned subsidiary of Robertson Corporation, sells inventory to Robertson at a 30% profit on selling price. The following data are available
Morneau Company, a 100% owned subsidiary of Robertson Corporation, sells inventory to Robertson at a 30% profit on selling price. The following data are available pertaining to inter-company purchases by Robertson:
Inter-company sales: |
| Unsold at year end (based on selling price): |
2016: | $17,600 |
| 2016: | $3,200 |
2017: | $24,300 |
| 2017: | $5,700 |
2018: | $27,000 |
| 2018: | $4,800 |
Morneaus profit numbers were $113,000, $204,000 and $225,600 for 2016, 2017, and 2018, respectively. Robertson received dividends from Morneau of $21,000 for 2016 and 2017, and $25,000 for 2018. Assume Morneau uses the cost method to account for its investment in Robertson. What is the balance in the pre-consolidation Income (loss) from subsidiary account for 2016?
Select one:
A. $ 20,040
B. $113,000
C. $ 21,000
D. $112,040
Assume Morneau uses the equity method to account for its investment in Robertson. What would be the debit to retained earnings regarding the 2016 consolidation entry related to the unrealized inventory profit?
Select one:
A. $1,710
B. $ 960
C. $-0-
D. $3,200
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