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Tiberend, Inc
Tiberend, Inc., sold $136,000 in inventory to Schilling Company during 2017 for $200,000. Schilling resold $117,000 of this merchandise in 2017 with the remainder to be disposed of during 2018. Assuming that Tiberend owns 35 percent of Schilling and applies the equity method, what journal entry is recorded at the end of 2017 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.)
Expert Solution
Working notes:-
Gross profit = $200,000 - $136,000
= $64,000
Gross profit margin = Gross profit / Sales
= $64,000 / $200,000
= 32%
Unrealized gross profit = (Inventory sold to S company - Inventory sold to other company) * Gross profit margin * Share of Ownership
=($200,000 - $117,000) * 32% * 35%
= $9,296
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