Lilo Ltd Sells Inventory Items to Its Subsidiary Stitch Ltd

question 16

Multiple Choice

Lilo Ltd sells inventory items to its subsidiary Stitch Ltd.If during the financial year 2013,the unrealised profits in ending inventory in Stitch Ltd exceeds that of its unrealized profits in beginning inventory,which of the following statements is correct with respect Lilo Ltd's consolidated financial statements after considering these transactions only?

• A) Consolidated profit will decrease;
• B) Consolidated deferred tax liability will increase;
• C) Consolidated ending inventory will decrease;
• D) Consolidated sales will be unaffected;
• E) None of the given answers.

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