How Do Intra-Entity Sales of Inventory Affect the Preparation of a Consolidated

question 108

Multiple Choice

How do intra-entity sales of inventory affect the preparation of a consolidated statement of cash flows?

• A) They must be added in calculating cash flows from investing activities.
• B) They must be deducted in calculating cash flows from investing activities.
• C) They must be added in calculating cash flows from operating activities.
• D) Because the consolidated balance sheet and income statement are used in preparing the consolidated statement of cash flows, no special elimination is required.
• E) They must be deducted in calculating cash flows from operating activities.

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Definitions:

Entrepreneurs

Individuals who create, organize, and manage a new business venture, taking on greater than normal financial risks in order to do so.

Landlords

Property owners who rent out their real estate assets to tenants in exchange for periodic payments.

Purely Competitive Economy

An idealized market structure where many firms sell identical products, entry and exit are easy, and no single buyer or seller can influence the market price.

Economic Profit

Sales minus explicit costs and implicit costs.