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A parent company sells merchandise to a subsidiary company during the year at a price of...

A parent company sells merchandise to a subsidiary company during the year at a price of $300,000, a 20% markup over its cost. The subsidiary company sells all the merchandise to outside customers during the year for $550,000.

Which statement is true concerning the required consolidation eliminating entries related to these transactions?

A.

Cost of goods sold is reduced by $300,000.
B.

Inventory is reduced by $50,000.
C.

Retained earnings is reduced by $50,000.
D.

Investment in subsidiary is reduced by $250,000.
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