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:

Magnetic Field

An invisible field around magnetic materials where magnetic forces are exerted and can be detected by other magnetic materials or moving electric charges.

North Magnetic Pole

The point on the Earth's surface where geomagnetic field lines are directed vertically downwards, the opposite of the Geographical North Pole.

Compass Needle

A magnetized pointer free to align itself with Earth's magnetic field, used in compasses for navigation.

Earth

The third planet from the Sun, our home planet, or in electrical terms, the reference point in an electrical circuit for the return path of currents or a direct physical connection to the ground.