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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