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

Accounting Jun 22, 2021

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.

Expert Solution

Answer

a .

Explanation

The correct option is A "not adjusted as the profit has been realized". Unrealized Profit is the profit contains by the part of inventory which is not still sold but the part of inventory sold by associate is contain realized profit is not need to adjust. The investment is adjusted only when inventory is unsold at year end.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote