In determining controlling interest in consolidated income in the consolidated financial statements, unrealized intercompany profit on inventory acquired by a parent from its subsidiary should:
A) not be eliminated.
B) be eliminated in full.
C) be eliminated to the extent of the parent company's controlling interest in the subsidiary.
D) be eliminated to the extent of the noncontrolling interest in the subsidiary.

Question

Quizplus · Accepted Answer

Unrealized intercompany profit on inventory acquired by a parent from its subsidiary should be eliminated in full in the consolidated financial statements to avoid overstating revenues and assets. This ensures that the consolidated financial statements reflect only the profits realized through transactions with external parties.

In Determining Controlling Interest in Consolidated Income in the Consolidated