1) If the accountant did not prepare the elimination entry of unrealized profit in inventories at the end of any year, this will affect the consolidated net income in that year and in all subsequent years

Answer:

If the accountant did not prepare the elimination entry of unrealized profit in inventories at the end of any year, this will affect the consolidated net income in that year and in all subsequent years

• In discussion the unrealized profits refers to those profits which arise from inter-group transactions and need to be removed as they are not absolute  profits and are liable to manipulations and thus group as a whole earns profit only when the goods are sold to an independent third party and thus the unrealized profit element in the closing inventory is liable to be eliminated.
• Also when the accountant did not prepare the elimination entry of profit those profits which have not been realized in inventories at the end of the of the financial year then this would result to an overstatement of both the inventory in the balance sheet and the Net Income in the consolidated Profit & Loss account because the unrealized profit adjustment is directly debited to the Cost of Goods Sold account.
• Thus this scenario result l to an understatement of consolidated Net Income in the coming years when the unrealized profit is required to recorded in the profit & loss but the accountant would be unable to do so as he has already booked profit in the first year.

Events upon which goodwill undergoes a test for impairment

• Goodwill undergoes test for impairment when there is deterioration in the economic conditions this is due to that the economy is producing less which could support its citizens and the total gross domestic product is low.
• Due to the increased in the competition .arising of tight competition from the nearby competitors could end up for the goodwill to undergo test for impairment resulting from competition from the firms which producing almost the same products .
• Due to the loss of key personnel and and the introduction of the regulatory act either from the government and the private companies fro certain production of product .

Step-by-step explanation

Goodwill impairment refers to the deduction from the earnings that the companies keep into the record on the income statement after identifying that the acquired asset associated with goodwill has not performed financially as expected.