Aladdin Ltd Sells Inventory for a Profit to Its Subsidiary

question 1

Multiple Choice

Aladdin Ltd sells inventory for a profit to its subsidiary Jasmine Ltd to be used as machinery in Jasmine Ltd's production process.The consolidation worksheet of Aladdin Ltd with respect to this transaction only should ­not include:

• A) a debit to sales.
• B) a credit to cost of sales.
• C) a credit to inventories.
• D) a credit to machinery.

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Definitions:

Profit Margin

A measure of profitability calculated as net income divided by revenue, or net profits divided by sales.

Interval Measure

Interval measure is a financial metric that assesses a company's ability to meet its current operational expenses by comparing its current assets to its current cash outflows.

Net Fixed Assets

These are a company's total fixed assets minus its accumulated depreciation, representing the actual value of the company’s fixed assets.

Average Daily Operating Costs

The average amount spent by a business on its day-to-day operational activities, divided by the number of days in the period.