The effect of an intragroup sale of inventories in a prior period, where the inventories are still on hand at the end of the current period, is that a credit adjustment is made to inventory in the current period.

Question

Quizplus · Accepted Answer

When inventories are sold from one subsidiary to another within the same group in a prior period, the sale is eliminated in the consolidation process and the inventories are still on hand at the end of the current period. To reflect the lower cost of inventories resulting from the intragroup sale, a credit adjustment is made to inventory in the current period. Therefore, the statement is true.

The Effect of an Intragroup Sale of Inventories in a Prior