Answered: rofit on end

Business

Accounting

rofit on end

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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Question

Starting from the separate cost of goods sold of the affiliates, the consolidated cost of
goods sold will be affected
by all of the following, except:

A.Excess of inventory FV over BV of the subsidiary at the date of acquisition
B.Unrealized profit on ending inventory
C.Realized profit on beginning inventory
D.Amortization of the excess of inventory FV over BV of the subsidiary

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Rustic Company has recognized an impairment loss on the value of inventory. If the inventory's value subsequently recovers, under which accounting standards may Rustic revalue the inventory upward and recognize a gain? A) Neither IFRS nor U.S. GAAP allows a recovery in inventory value to be recognized as a gain. B) IFRS allows a recovery in inventory value to be recognized as a gain, but U.S. GAAP does not. c) U.S. GAAP allows a recovery in inventory value to be recognized as a gain, but IFRS does not.
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A partially owned subsidiary sold a non-depreciable assets to its parent at a loss. In the year subsequent to the year of intercompany sale of non-depreciable assets, the working paper consolidation entry under cost method will debit: I. Non-depreciable assets Ill. NCI I. Investment in subsidiary IV. Retained Earnings a. I, III and IV b. I c. III and IV d. I, II, and IV
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I need answers for part b
Explain why consolidated entities defer intra-entity gross profit in ending inventory and the consolidation procedures required subsequently to recognize profits.
(a) What is the underlying principle in eliminating intercompany inventory transactions? (b) How do intercompany inventory transactions effect NCI (non-controlling interest)? Note the effect for both downstream and upstream sales.