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

Question

Quizplus · Accepted Answer

The consolidated gross profit is calculated as the difference between consolidated revenue and consolidated cost of goods sold, regardless of whether the sales are upstream or downstream. The other line items (consolidated retained earnings, noncontrolling interest share, and controlling interest share of consolidated net income) may be affected by upstream or downstream sales and therefore are not indifferent to the type of sales.

Assume There Are Routine Inventory Sales Between Parent Companies and Subsidiaries.When