Which of the following is true about inter-entity sales of inventory? a. Companies in an economic entity may increase the level of consolidated sales reported by selling inventory between themselves. b. Transactions of inventory between entities that form an economic group should be eliminated in proportion to the level of control between the parent entity and the subsidiary entity. Oc. If we simply aggregate the sales of the parent and subsidiary companies, without adjustment, when there have been intragroup sales, total income would be overstated. Od. The value of inventory in an inter-entity sale should be re-measured to fair value and the adjustment to be recorded as consolidation income/loss. e. All of the above

Which of the following is true about inter-entity sales of inventory? a. Companies in an economic entity may increase the level of consolidated sales reported by selling inventory between themselves. b. Transactions of inventory between entities that form an economic group should be eliminated in proportion to the level of control between the parent entity and the subsidiary entity. Oc. If we simply aggregate the sales of the parent and subsidiary companies, without adjustment, when there have been intragroup sales, total income would be overstated. Od. The value of inventory in an inter-entity sale should be re-measured to fair value and the adjustment to be recorded as consolidation income/loss. e. All of the above

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The sale of inventory items by a parent company to an affiliated company a. enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. b. affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. c. does not result in consolidated income until the merchandise is sold to outside entities. d. does not require a working paper adjustment if the merchandise was transferred at cost.
Choose the correct. What is the primary reason we defer financial statement recognition of gross profits on intra-entity sales for goods that remain within the consolidated entity at year-end?a. Revenues and COGS must be recognized for all intra-entity sales regardless of whether the sales are upstream or downstream.b. Intra-entity sales result in gross profit overstatements regardless of amounts remaining in ending inventory.c. Gross profits must be deferred indefinitely because sales among affiliates always remain in the consolidated group.d. When intra-entity sales remain in ending inventory, control of the goods has not changed.
What is the primary reason we defer financial statement recognition of gross profits on intra-entity sales for goods that remain within the consolidated entity at year-end?a. Revenues and COGS must be recognized for all intra-entity sales regardless of whether the sales are upstream or downstream.b. Intra-entity sales result in gross profit overstatements regardless of amounts remaining in ending inventory.c. Gross profits must be deferred indefinitely because sales among affiliates always remain in the consolidated group.d. When intra-entity sales remain in ending inventory, control of the goods has not changed.
Explain why consolidated entities defer intra-entity gross profit in ending inventory and the consolidation procedures required subsequently to recognize profits.
Please answer the following questions relating to unrealized profit in a business combination. 1) Intra entity transfers between the components of business combinations are quite common. Why do these intra company transactions occur frequently? 2) How are unrealized inventory gross profit created, and what are the necessary consolidation entries created to account for these gains? 3) How do intra entity profit present in any year affect the noncontrolling Interest calculation?
why would a corporate entity mark up inventory when selling on an intercompany basis?
What is the potential impact of differences in areas such as inventory valuation of unilever united states inc ?
Among the various reasons given for the internal transfer of merchandise inventory of a price above its cost are Efficiency in pricing inventories The equitable allocation of income amongst the various units of the business enterprise Concealment of the true profit margins from branch personnel All of the above are considered valid reasons
Explain the consolidation adjustment needed in group retained earnings and group inventory account for unrealised profit arisen from trading of goods.
Among the various reasons given for the internal transfer of merchandiseinventory of a price above its cost are: A. Efficiency in pricing inventoriesB. Concealment of the true profit margins from branch personnelC. The equitable allocation of income amongst the various units of the business enterpriseD. All of the above are considered valid reasons
What is the difference between upstream sale of inventory and an downstream sale? Why is it important to know the direction of sale when preparing the consolidated financial statements?
Choose the correct. What information about revenues by geographic area should a company present?a. Disclose separately the amount of sales to unaffiliated customers and the amount of intra-entity sales between geographic areas.b. Disclose as a combined amount sales to unaffiliated customers and intra-entity sales between geographic areas.c. Disclose separately the amount of sales to unaffiliated customers but not the amount of intra-entity sales between geographic areas.d. No disclosure of revenues from foreign operations need be reported.