江西财经大学高级财务会计国际学院题库chapter_05.docVIP

Advanced Accounting, 11e (Beams/Anthony/Bettinghaus/Smith) Chapter 5 Intercompany Profit Transactions - Inventories Multiple Choice Questions 1) The material sale of inventory items by a parent company to an affiliated company A) enters the consolidated revenue computation only if the transfer was the result of arms length bargaining. B) affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. C) does not result in consolidated income until the merchandise is sold to outside parties. D) does not require a working paper adjustment if the merchandise was transferred at cost. Answer: C Objective: LO1 Difficulty: Easy 2) Phast Corporation owns a 80% interest in Stechno Company, acquired several years ago at a cost equal to book value and fair value. Stechno sells merchandise to Phast for the first time in 2011, and some is unsold at December 31, 2011. In computing income from the investee for 2011 under the equity method, Phast uses which equation? A) 80% of Stechnos income less 100% of the unrealized profit in Phasts ending inventory B) 80% of Stechnos income plus 100% of the unrealized profit in Phasts ending inventory C) 80% of Stechnos income less 80% of the unrealized profit in Phasts ending inventory D) 80% of Stechnos income plus 80% of the unrealized profit in Phasts ending inventory Answer: C Objective: LO1 Difficulty: Moderate 3) Assume there are routine inventory sales between parent companies and subsidiaries. When preparing the consolidated financial statements, which of the following line items is indifferent to the sales being either upstream or downstream? A) Consolidated retained earnings B) Consolidated gross profit C) Noncontrolling interest share D) Controlling interest share of consolidated net income Answer: B Objective: LO1 Difficulty: Easy 4) A(n) ________ sale is a sale by a parent company to a subsidiary. A(n) ________ sale is a sale by a subsidiary to a parent company. A