An Intra-Entity Transfer Took Place Whereby the Transfer Price Was

question 78

Multiple Choice

An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset. Which statement is true for the year subsequent to the year of transfer?

• A) A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.
• B) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
• C) A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
• D) A worksheet entry is made with a debit to retained earnings for an upstream transfer, regardless of the method used to account for the investment.
• E) No worksheet entry is necessary.

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Definitions:

Net Working Capital

A financial measure that illustrates the gap between the current resources of a business and its short-term obligations.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities.

Liquid Asset

An asset that can be quickly converted into cash with minimal impact to its value.

Liquid Assets

Assets that can be easily converted into cash with little impact on their value.