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James Corporation owns 80 percent of Carl Corporation's common stock. During October, Carl sold merchandise to James for $290,000. At December 31, 30 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 is

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Answer:

$26,100

Explanation:

Calculation to determine what The amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process is

First step is to calculate the Merchandise remaining in James's inventory

Merchandise remaining in James's inventory $290,000 × 30%

Merchandise remaining in James's inventory= $87,000

Now let calculate the intra-entity gross profit in inventory at December 31 that should be eliminated

Intra-entity gross profit=87,000 × 30%

Intra-entity gross profit= $26,100

Therefore The amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process is $26,100

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