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:

Endothermic

A reaction or process that absorbs energy from its surroundings, often in the form of heat.

Stability

The resistance of a chemical substance or compound to undergoing a change in its structure, properties, or composition over time or under certain conditions.

Kinetic Energy

The energy possessed by an object due to its motion, calculable as one-half the mass times the square of its velocity.

Electron Clouds

The region around an atomic nucleus where electrons are likely to be found, representing the electron’s probable location based on quantum mechanics.