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so intercompany inventory parent and sub when they sell to each other is a hot topic on the CPA far exam so if the parent Corp owns a hundred percent or even if they own 80 percent of the stock of the sub you have this issue whenever the parent sells inventory to the sub or the sub sells inventory to the parent it doesnt matter which direction its the same issue so the parent in this example is gonna sell inventory that costs them eight hundred thousand to the sub for nine hundred thousand and theres gonna be a hundred thousand dollar profit on the sale but this is a wholly owned subsidiary and you cant show profit of that hundred thousand none of the inventory purchased by the sub was sold yet to outsiders by December 31st year one so they bought the inventory from the parent they still have it as of the end of the year and thats important to know and whether they still have it or not because thats gonna show you how youre going to eliminate that hundred thousand dollar profit
