How Are Intra-Entity Inventory Transfers Treated on the Consolidation Worksheet

question 98

Essay

How are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in a consolidated statement of cash flows?

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Definitions:

Process Costing

An accounting methodology used for uniform products, allocating production costs to units of output based on the process they undergo.

Weighted-Average Method

A cost accounting method that calculates the cost per unit of inventory based on the weighted average of the costs of similar items at the beginning of a period and the costs of similar items during the period.

Conversion Costs

The combined costs of direct labor and manufacturing overhead, incurred to convert raw materials into finished goods.

Process Costing

An accounting methodology used for homogenous products, which accumulates production costs and then allocates them to large numbers of identical units.