Question

Camille, Inc., sold $136,000 in inventory to Eckerle Company during 2020 for $200,000. Eckerle resold $117,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming that Camille owns 35 percent of Eckerle and applies the equity method, what journal entry is recorded at the end of 2020 to defer the intra-entity gross profit? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Answer 1

S.No.	Account Titles	Debit $	Credit $
1	Equity income from Eckerle Company	9,296
	Investment in Eckerle Company		9,296

Workings:
Ending inventory	$ 83,000	(200,000 - 117,000 )
x Gross profit %	32%	{(200,000 - 136,000 ) / 200,000}
Gross profit	$ 26,560
x % holding	35%
Intra-­entity gross profit -deferred	$ 9,296