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Homework answers / question archive / 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
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.
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.
