On January 1, 2012, Oliver Ltd

Multiple Choice

On January 1, 2012, Oliver Ltd. formed Solo Co., a 100% owned subsidiary. During 2014, Oliver sold Solo $200,000 in goods. The unrealized profit in Solo's inventories was $40,000 at December 31, 2013 and $50,000 at December 31, 2014. Ignoring income taxes, what adjustment should be made to the consolidated financial statements for the year ended December 31, 2014 to reflect the unrealized profit in Solo's beginning inventory?

A) Inventory at December 31, 2014 should be decreased by $40,000.
B) Retained earnings at the end of 2014 should be increased by $40,000.
C) Retained earnings at the end of 2014 should be decreased by $40,000.
D) Cost of goods sold for 2014 should be decreased by $40,000.