Company a Sells Inventory to Its Subsidiary, Company B at a Mark-Up

question 65

Multiple Choice

Company A sells inventory to its subsidiary, Company B at a mark-up of 20% on cost. Of what significance is this transaction, should A wish to prepare consolidated financial statements? The inventory is still in B's warehouse at year end.

• A) This is not significant. Any inter-company profits are eliminated during the Consolidation process.
• B) A's net income will be under-stated.
• C) B's income will be over-stated.
• D)There will be unrealized profits in inventory which will only be realized once B sells this inventory to outsiders.

Grasp the terms around remedy modification or limitation, including conditions under which a court may refuse to uphold such agreements.

Evaluate the role of usage of trade in imposing remedies for breaches of contract under the UCC.

Understand the UCC's provisions on acceptance of nonconforming goods and seeking monetary damages.

Distinguish between the UCC's approach to limiting consequential damages for commercial losses versus those for injury to the person.

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Definitions:

Eukaryote

Single- or multicelled organism whose cells characteristically have a nucleus; a protist, fungus, plant, or animal.

Protist

A diverse group of eukaryotic organisms, mostly unicellular, that are not plants, animals, or fungi, including amoebas, algae, and plasmodium.

Prokaryote

Informal term for a single-celled organism without a nucleus; a bacterium or archaeon.

Contractile Vacuole

An organelle found in some protozoa, which expels excess liquid on contraction.