How do intra-entity transfers 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 transfers of inventory do not affect the consolidated statement of cash flows because they are eliminated in the consolidation process, and the consolidated financial statements are used to prepare the cash flow statement.

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