Gargiulo Company, a 90% owned subsidiary of Posito Corporation

Gargiulo Company, a 90% owned subsidiary of Posito Corporation

REFERENCE: Ref. 05_07

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price.  The following data are available pertaining to intra-entity purchases.  Gargiulo was acquired on January 1, 2010.

Assume the equity method is used. The following data are available pertaining to Gargiulo’s income and dividends.

QUESTION #21

REFER TO: Ref. 05_07

50.  Compute the equity in earnings of Gargiulo reported on Posito’s books for 2010.

A)  $63,000.

B)  $62,730.

C)  $63,270.

D)  $70,000.

E)  $62,700.

QUESTION #22

REFER TO: Ref. 05_07

56.  For consolidation purposes, what amount would be debited to cost of goods sold for the 2010 consolidation worksheet with regard to unrealized gross profit of the intra-entity transfer of merchandise?

A)  $300.

B)  $240.

C)  $2,000.

D)  $1,600.

E)  $270.

QUESTION #23

REFER TO: Ref. 05_07

59.  For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2010 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise?

A)  $0.

B)  $1,600.

C)  $300.

D)  $240.

E)  $270.