An Upstream Sale of Inventory Is a Sale

question 46

Multiple Choice

An upstream sale of inventory is a sale:

• A) between subsidiaries owned by a common parent.
• B) with the transfer of goods scheduled by contract to occur on a specified future date.
• C) in which the goods are physically transported by boat from a subsidiary to its parent.
• D) made by the investor to the investee.
• E) made by the investee to the investor.

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Definitions:

Equity Method

An accounting technique used to record investments in associate companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee's net profits or losses.

Patent

A legal right granted by a government authority that gives an inventor exclusive rights to use, make, and sell an invention for a certain period of time.

Significant Influence

The capacity of an investor to participate in the financial and operating policy decisions of an investee but not control those policies.