Tara Company Owns 80 Percent of the Common Stock of Stodd

Essay

Tara Company owns 80 percent of the common stock of Stodd Inc. In the current year, Tara reports sales of $5,000,000 and cost of goods sold of $3,500,000. For the same period, Stodd has sales of $500,000 and cost of goods sold of $400,000. During the year, Stodd sold merchandise to Tara for $40,000 at a price based on the normal markup. At the end of the year, Tara still possesses 20 percent of this inventory. Prepare the consolidation entry to defer the unrealized gain.