The Material Sale of Inventory Items by a Parent Company

question 20

Multiple Choice

The material sale of inventory items by a parent company to an affiliated company

• A)enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining.
• B)affects consolidated net income under a periodic inventory system but not under a perpetual inventory system.
• C)does not result in consolidated income until the merchandise is sold to outside parties.
• D)does not require a working paper adjustment if the merchandise was transferred at cost.

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Definitions:

Affidavit

A written statement confirmed by oath or affirmation, for use as evidence in court.

Witness

An individual who has knowledge about a fact or event, often called upon to testify in court.

Civil Litigation Trial

The court process in which parties in a dispute present their case to a judge or jury, involving non-criminal matters.

Plaintiff

An individual or entity who initiates a lawsuit against another in a court of law.