Intercompany profits in both the beginning and the ending inventories of the purchasing affiliate are unrealized at the end of the accounting period.

Question

Quizplus · Accepted Answer

Intercompany profits in the beginning inventory are considered realized at the end of the accounting period because the goods have presumably been sold to external parties, whereas profits in the ending inventory are still unrealized since those goods have not yet been sold outside the corporate group.

Intercompany Profits in Both the Beginning and the Ending Inventories