When Comparing the Difference Between an Upstream and Downstream Transfer

question 38

Multiple Choice

When comparing the difference between an upstream and downstream transfer of inventory, and using the initial value method, which of the following statements is true when there is a non-controlling interest?

• A) Income from subsidiary will be lower by the amount of the beginning inventory profits multiplied by the non-controlling interest percentage for upstream transfers.
• B) Income from subsidiary will be higher by the amount of the beginning inventory profits multiplied by the non-controlling interest percentage for upstream transfers.
• C) Income from subsidiary will be reduced for downstream ending inventory profits but not for upstream profits, before the non-controlling interest.
• D) Income from subsidiary will be reduced for upstream ending inventory profits but not for downstream profits, before the non-controlling interest.
• E) Income from subsidiary will be the same for upstream and downstream profits.

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Definitions:

Diamond

A precious gemstone formed under high temperature and pressure conditions, often used in jewelry and industrial applications, not primarily an economic term unless discussing market dynamics.

Market Outcomes

The final results of all the buying and selling interactions between consumers and firms in a particular market.

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.

Market Inequalities

Disparities that exist within the economic market system, often reflecting differences in wealth, income, and access to resources.