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Question
Hill Company entered into the following inventory transactions with its investees during 2012:
Sold inventory to Grant Inc. for $150,000. The inventory originally cost Hill $120,000. Grant sold 75% of the inventory during 2012.
Hill owns 15% of the voting stock of Grant and does not use the equity method to account for the Grant investment.
Sold inventory to Thornton Inc. for $400,000. The inventory originally cost Hill $320,000. Thornton sold 60% of the inventory during 2012. Hill owns 100% of the voting stock of Thornton.
Which of the following adjustments is not correct with respect to preparing Hill's 2012 consolidated financial statements?
A. Sales will be decreased $400,000.
B. Cost of goods sold will be decreased $368,000.
C. Inventory will be decreased $32,000.
D. Gross profit will be decreased $110,000.
Answer
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