Which Statement Is True Concerning Unrealized Profits in Intra-Entity Inventory

question 59

Multiple Choice

Which statement is true concerning unrealized profits in intra-entity inventory transfers when an investor uses the equity method?

• A) The investor and investee make reciprocal entries to defer and realize inventory profits.
• B) The same adjustments are made for upstream and downstream transfers.
• C) Different adjustments are made for upstream and downstream transfers.
• D) No adjustments are necessary.
• E) Adjustments will be made only when profits are known upon sale to outsiders.

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Definitions:

Framing Effect

The impact on decision making caused by the way information is presented, where different presentations of the same information can lead to different decisions.

Faulty Decisions

Choices made based on incorrect assumptions or incomplete information, leading to suboptimal outcomes.

Decision Makers

Decision makers are individuals or groups responsible for making choices or decisions that will influence the outcome of a specific task, project, or strategy.