Where an Investor Sells Inventory to an Associate and the Inventory

question 2

Multiple Choice

Where an investor sells inventory to an associate and the inventory is still on hand at the end of the year the investor's share of the associate's profits is:

• A)not affected as unrealised profits are only considered to arise in a parent-subsidiary relationship;
• B)not affected as the unrealised profit is in the books of the investor,not the associate;
• C)increased by the investor's share of the unrealised profit;
• D)decreased by the investor's share of the unrealised profit.

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Definitions:

Classified Balance Sheet

A balance sheet that groups together similar assets and liabilities, using several classifications and categories, to provide useful information to the users.

Deferred Expenses

Costs that are incurred but not expensed immediately and are carried on the balance sheet as an asset until recognized.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Accrued Taxes Payable

Liabilities for taxes that have been incurred but not yet paid.