Where an investor sells inventory to an associate and the inventory is still on hand at the end of the year,the investor's share of the associate's profit is:
A)not affected as unrealised profits are only considered to arise in a parent-subsidiary relationship.
B)not affected as the unrealised profit is in the books of the investor,not the associate.
C)increased by the investor's share of the unrealised profit.
D)decreased by the investor's share of the unrealised profit.

Question

Quizplus · Accepted Answer

The investor's share of the associate's profit is decreased by the investor's share of the unrealised profit because the profit from the sale is not realized until the inventory is sold to a third party.

Where an Investor Sells Inventory to an Associate and the Inventory