During the Year a Parent Makes Sales of Inventory at a Profit

question 13

Multiple Choice

During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary.The subsidiary also makes sales of inventory at a profit to its parent during the same year.Both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another.Consolidated revenues for the year should exclude:

• A)80 percent of the total revenues from intercompany sales.
• B)total revenues from intercompany sales.
• C)only the revenues from the subsidiary's intercompany sales.
• D)only the revenues from the parent's intercompany sales.

Identify the importance of budgeted production units and their relationship with actual production in variance analysis.

Recognize the procedure for computing variances at the time of purchase or production.

Interpret the implications of variances for managerial decision-making and cost control.

Understand the concepts and calculations related to standard cost systems.

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Definitions:

Income Recognition

The accounting principle that income should be recognized in the accounting period in which it is earned, irrespective of when the cash is received.

Initial Impairment Assessment

The first step in evaluating whether an asset's carrying amount exceeds its recoverable amount, indicating a potential impairment loss.

Intangible Asset

An asset that lacks physical substance but is identifiable and provides economic benefits to the owner, such as patents, trademarks, and copyrights.

Internal Recordkeeping

The process of maintaining all company records, including financial documents, employee information, and operational logs, primarily for internal use.