What is a good response to? Unrealized intercompany inventory profits from a prior period are eventually resold in the current period to continue to lower inventory numbers. This eventually increases the net income, however the profits are pushed until the resale period to accurately report the income. The sales of inventory between the parent company and the subsidiary should be eliminated and therefore would no affect the parent's financial statements. However, when the inventory is finally sold to an unaffiliated customer, not a subsidiary, the income would then be reported and affect the net income and financial statements. It is important to note for record keeping if a transaction has occurred upstream or downstream, however, any intercompany transactions, whether upstream or downstream, should be eliminated (Taylor, 2022).
What is a good response to?
Unrealized intercompany inventory profits from a prior period are eventually resold in the current period to continue to lower inventory numbers. This eventually increases the net income, however the profits are pushed until the resale period to accurately report the income. The sales of inventory between the parent company and the subsidiary should be eliminated and therefore would no affect the parent's financial statements. However, when the inventory is finally sold to an unaffiliated customer, not a subsidiary, the income would then be reported and affect the net income and financial statements. It is important to note for record keeping if a transaction has occurred upstream or downstream, however, any intercompany transactions, whether upstream or downstream, should be eliminated (Taylor, 2022).
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