Which Statement Is True Concerning Unrealized Profits in Intra-Entity Inventory

question 59

Multiple Choice

Which statement is true concerning unrealized profits in intra-entity inventory transfers when an investor uses the equity method?

• A) The investor and investee make reciprocal entries to defer and realize inventory profits.
• B) The same adjustments are made for upstream and downstream transfers.
• C) Different adjustments are made for upstream and downstream transfers.
• D) No adjustments are necessary.
• E) Adjustments will be made only when profits are known upon sale to outsiders.

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Definitions:

Substitution Effect

The economic principle referring to the change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute more expensive items with cheaper alternatives.

Product Rises

This term seems unclear or incomplete. If referring to a situation where the price or demand for a product increases, there is no single term that universally describes this scenario as "Product Rises." NO.

Income Effect

The change in consumption resulting from a change in real income, which can itself result from changes in wages or prices.

Money Income

The total amount of monetary earnings or receipts a person or household receives from various sources including wages, dividends, and benefits.