Which of the Following Statements Is Not Correct

question 15

Multiple Choice

Which of the following statements is not correct?

• A) The consolidated income statement is the result of combining mechanically the parent and subsidiary income statements with the elimination of any intra-group transactions.
• B) The elimination of intra-group transactions is mathematically automatic since the sales revenue recognized in one of the income statement is part of the costs incurred in the other's income statement.
• C) The intra-group transactions affect the income of the consolidated entity.
• D) It is critical to explicitly cancel out all intra-group transactions to avoid the risk of biasing operating ratios involving sales revenue and cost of sales separately (by artificially inflating the balances).

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Definitions:

Trade Union

An organization formed by workers to protect their rights and interests through collective bargaining.

Bargaining Unit

A group of employees with a common interest, often related to job function or workforce sector, represented collectively in negotiations with employers.

Workers' Compensation Act

Legislation that provides financial benefits to workers who suffer injuries or illnesses as a result of their job duties.

Compulsory Arbitration

A mandatory process where disputing parties are required to resolve their differences through an arbitrator's decision, rather than through a court trial.