Gross profit on inventory items sold for use in the operations of an affiliate will be realized for consolidated statement purposes immediately.

Question

Quizplus · Accepted Answer

Gross profit on inventory items sold to an affiliate is not realized for consolidated financial statement purposes until the affiliate sells the inventory items to an outside party. This is because intercompany transactions are eliminated in consolidation to present the financial position and results of operations of the consolidated entity as if the group were a single entity.

Gross Profit on Inventory Items Sold for Use in the Operations