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:

Decrease in Supply

A situation where the quantity of a good or service that producers are willing to offer for sale at a given price level decreases.

Decrease in Demand

A reduction in the quantity of a good or service that consumers are willing and able to purchase at a given price range.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of the good that consumers are willing to buy.