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

question 49

Multiple Choice

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

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

---

Definitions:

Interaction

The process by which two or more entities influence each other's actions; in social contexts, it involves communication and behavior among individuals or groups.

Relaxed

A state or condition of being free from tension and anxiety.

Trait Terms

Specific words or phrases used to describe consistent tendencies or patterns in an individual's behavior, emotions, and thoughts.