When related companies trade with each other, sales between them require special accounting treatment, because a business cannot recognize profit through business activities with itself. When an investor company sells inventory to its investee company, the investment company can defer profit on such inventory until it is sold to an unrelated party. The income effect reported from ownership in S, for the year ended December 31, 2021.

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Chapter 1, Problem 29P

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Introduction: When related companies trade with each other, sales between them require special accounting treatment, because a business cannot recognize profit through business activities with itself. When an investor company sells inventory to its investee company, the investment company can defer profit on such inventory until it is sold to an unrelated party.

The income effect reported from ownership in S, for the year ended December 31, 2021.

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