Where an Investor Sells Inventory to an Associate in a Prior

question 32

Multiple Choice

Where an investor sells inventory to an associate in a prior year and the inventory is sold by the associate during the current year,the investment in associate account is:

• A)not adjusted as the profit has been realised.
• B)decreased by the investor's share of the realised profit.
• C)increased by the investor's share of the realised profit.
• D)increased by the full amount of the realised profit.

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Definitions:

Equipment Distribution

The process of supplying equipment to various departments or locations within an organization or among individuals.

Cash Distributions

Payments made in cash by a corporation to its shareholders, typically from earnings or profits.

Tax-exempt Income

Income that is not subject to federal income tax, such as certain interest income from municipal bonds.

Ordinary Income

Income earned from standard operations, subject to standard tax rates, including wages, salaries, commissions, and interest.