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Selected data for two subsidiaries of Dunn Corp. taken from December 31, Year 1 pre-closing trial balances are as follows: Banks Co. (DR) Lamm Co. (CR)
Shipments to Banks $ – $150,000
Shipments from Lamm 200,000 –
Intercompany inventory profit on total shipments – 50,000
Additional data relating to the December 31, Year 1 inventory are as follows:
Inventory acquired from outside parties $175,000 $250,000
Inventory acquired from Lamm 60,000 –
At December 31, Year 1, the inventory reported on the combined balance sheet of the two subsidiaries should be:
a. $425,000
b. $435,000
c. $470,000
d. $485,000
I know how to get the elimination entry of $15,000 but I’m not sure I understand why we add 175,000 + 250,000 + 60,000 if the 250,000 is a credit entry? Wouldn’t it be 175,000 + 60,000 – 250,000?
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