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 inventorybetween themselves.b.c.If we simply aggregate the sales of the parent and subsidiary companies, without adjustment, when therehave been intragroup sales, total income would be overstated.Transactions of inventory between entities that form an economic group should be eliminated in proportionto the level of control between the parent entity and the subsidiary entity,d. The value of inventory in an inter-entity sale should be re-measured to fair value and the adjustment to berecorded as consolidation income/loss.e All of the above.

The financial statements of a subsidiary company are consolidated with the financial statements of a…

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, c. 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, c. 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 Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter15: Shareholders’ Equity: Capital Contributions And Distributions

Section: Chapter Questions

Problem 9Q

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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.
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