Assume That an Entity Acquired 150 Items of Inventory at a Cost

question 13

Multiple Choice

Assume that an entity acquired 150 items of inventory at a cost of $90 each,and sold 100 of the items for $160 each when the replacement cost to the entity was $120 each.Also assume that the replacement cost of the 50 remaining items of inventory at year end was $130.What would be the realised holding gain on the inventory that was sold?

• A) $7 000 [100 x ($160 - $90)]
• B) $4 000 [100 x ($130 - $90)]
• C) $3 000 [100 x ($120 - $90)]
• D) $500 [50 x ($130 - $120)]

Comprehend the accounting treatment for investment in subsidiaries and its impact on the parent company's financial statements.

Acknowledge the importance of the acquisition date and investment date in consolidation and their implications.

Realize the implications of different financial reporting periods between parent and subsidiaries.

Identify the basis for measuring assets in consolidated financial statements.

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Definitions:

Compulsory Arbitration

A form of arbitration where parties are forced to resolve disputes through an arbitrator or arbitration panel rather than the courts.

Inflationary Increases

The rise in the price level of goods and services over a period, eroding purchasing power and value of money.

Collective Bargaining

The negotiation process between employers and a group of employees aimed at reaching agreements to regulate working conditions.

National Labor Relations Act

A foundational statute of US labor law that guarantees workers the right to form unions, engage in collective bargaining, and take collective action such as strikes.