How do intra-entity sales of inventory affect the preparation of a consolidated statement of cash flows?
A) They must be added in calculating cash flows from investing activities.
B) They must be deducted in calculating cash flows from investing activities.
C) They must be added in calculating cash flows from operating activities.
D) Because the consolidated balance sheet and income statement are used in preparing the consolidated statement of cash flows, no special elimination is required.
E) They must be deducted in calculating cash flows from operating activities.

Question

Quizplus · Accepted Answer

Intra-entity sales of inventory are eliminated in consolidation, so they do not affect the consolidated statement of cash flows directly. The consolidated balance sheet and income statement already reflect these eliminations.

How Do Intra-Entity Sales of Inventory Affect the Preparation of a Consolidated