Where an Investor Sells Inventories to an Associate and the Inventories

question 17

Multiple Choice

Where an investor sells inventories to an associate and the inventories are still on hand at the end of the year the investor's share of the associate's profits is:

• A) decreased by the investor's share of the unrealised profit.
• B) increased by the investor's share of the unrealised profit.
• C) not affected as the unrealised profit is in the books of the investor, not the associate.
• D) not affected as unrealised profits are only considered to arise in a parent-subsidiary relationship.

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Definitions:

Transactional Approach

An accounting method focusing on the individual transactions and events that have a financial impact on a company, analyzing each separately.

Net Income

The total earnings or profit of a company after subtracting all expenses, taxes, and costs, indicative of the company's financial health over a specific time period.

Income Statement

A financial statement showing a company's revenues, expenses, and profits over a specific period, indicating financial performance.

Financial Statement

Documents that present the financial activities and conditions of a business or entity, including the balance sheet, income statement, and cash flow statement.