Which Statement Is True Concerning Unrealized Profits in Inventory Transfers

question 56

Multiple Choice

Which statement is true concerning unrealized profits in inventory transfers using the equity method?

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