Where an Investor Sells Inventory to an Associate in a Prior

question 13

Multiple Choice

Where an investor sells inventory to an associate in a prior year and the inventory is sold by the associate during the current year the investment in associate account is:

• A)unaffected;
• B)decreased by the investor's share of the realised profit;
• C)increased by the investor's share of the realised profit;
• D)increased by the full amount of the realised profit.

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Definitions:

Dividends Payable

A liability on the company's balance sheet that indicates the amount of dividends declared by the board of directors but not yet paid to shareholders.

Additional Paid-in Capital

The amount of money investors pay above the par value of shares, reflecting the excess amount invested by shareholders in the company.

Common Stock

A type of equity security that represents ownership in a corporation, including voting rights and a share of profits through dividends.

Account Payable

An obligation or liability of a company to pay a debt owed to a creditor or supplier for goods and services received.