When eliminating any unrealised profit arising when a joint operator provides services to a joint operation the profit is eliminated against:
A) the investment in the joint operation;
B) retained earnings;
C) work in progress, finished goods and other inventory related accounts;
D) cost of sales.

Question

Quizplus · Accepted Answer

Unrealized profit arising from services provided to joint operations is eliminated against work in progress, finished goods and other inventory related accounts. This is because the profit is already reflected in the inventory values and eliminating it against these accounts will correctly reflect the true value of the inventory. Eliminating the profit against investment in the joint operation or retained earnings would not be appropriate. Cost of sales is not relevant in this context.

When Eliminating Any Unrealised Profit Arising When a Joint Operator