@cpahopeful it helps when dealing with consolidation entries involving inventory to imagine it as a true up of original cogs.
The subsidiary that is selling to an outside party should be thought of as a conduit and the cogs that they are representing aren't the actual costs to produce the product.
The subs purchase price less gross profit is the true cogs which need to represented in consolidated statements.
If all the inventory is sold to outside parties, the gp that originally existed should reduce cogs on the subs book. (To true up to real COGS)
If inventory remains, a portion of that original gross profit needs to be used to reduce that inventory value to its true cost. Not the cost to the sub which was the selling price of the parent.
I hope that made some sense, I'm currently in Presidents' Day library hell.
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Ethics Exam - 90
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