Which of the Following Statements Is Incorrect

question 4

Multiple Choice

Which of the following statements is incorrect?

• A)where consolidated financial statements are not prepared,the cost method must be applied in the investor's own books
• B)only the percentage of the investor's ownership interest in the associate should be eliminated
• C)unrealised profit and losses on both upstream and downstream transactions should be eliminated
• D)when an asset is transferred with an intention that the asset will not be sold to an external party,realisation of the profit/loss occurs as the asset is used/consumed

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Definitions:

Journal Entry

A record in the books of accounts that shows a business transaction and its effect on the company's finances.

Percent of Receivables Method

An accounting method used to estimate the amount of accounts receivable that will not be collected by calculating a percentage of receivables deemed uncollectible.

Uncollectible Accounts Receivable

Accounts from customers that are considered unrecoverable, leading to a write-off as a bad debt expense.

Allowance

A reduction from the gross amount of an asset or liability, created to account for potential future adjustments such as doubtful debts or returns.