When Comparing the Difference Between an Upstream and Downstream Transfer

question 104

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

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Definitions:

Job-Order Costing

A cost accounting system that assigns costs to specific production batches or jobs, often used for custom orders.

Cost Reconciliation Report

A financial document detailing the reconciliation of costs, often between actual and standard figures, in the context of manufacturing or production.

Ending Work in Process Inventory

Ending work in process (WIP) inventory refers to the total cost of all unfinished goods that are still in the production process at the end of an accounting period.

Beginning Work in Process Inventory

Beginning work in process inventory represents the value of production inputs that are partially completed at the start of an accounting period.