advanced accounting final EXAM (chp 5-7)

advanced accounting final EXAM (chp 5-7) What is the primary reason we defer financial statement recognition of gross profits on intra-entity sales for goods that remain within the consolidated entity at year-end? a. Revenues and COGS must be recognized for all intra-entity sales regardless of whether the sales are upstream or downstream. b. Intra-entity sales result in gross profit overstatements regardless of amounts remaining in ending inventory. c. Gross profits must be deferred indefinitely because sales among affiliates always remain in the consolidated group. d. When intra-entity sales remain in ending inventory, control of the goods has not changed. - ANSWERd. When intra-entity sales remain in ending inventory, control of the goods has not changed. In computing the non-controlling interest's share of consolidated net income, how should the subsidiary's net income be adjusted for intra-entity transfers? a. The subsidiary's reported net income is adjusted for the impact of upstream transfers prior to computing the noncontrolling interest's allocation. b. The subsidiary's reported net income is adjusted for the impact of all transfers prior to computing the noncontrolling interest's allocation. c. The subsidiary's reported net income is not adjusted for the impact of transfers prior to computing the noncontrolling interest's allocation. d. The subsidiary's reported net income is adjusted for the impact of downstream transfers prior to computing the non-controlling interest's allocation. - ANSWERa. The subsidiary's reported net income is adjusted for the impact of upstream transfers prior to computing the non-controlling interest's allocation. An enterprise that holds a variable interest in a variable interest entity (VIE) is required to consolidate the assets, liabilities, revenues, expenses, and noncontrolling interest of that entity if: a. The VIE has issued no voting stock. b. The variable interest held by the enterprise involves a lease. c. The enterprise has a controlling financial interest in the VIE. d. Other equity interests in the VIE have the obligation to absorb the expected losses of the VIE. - ANSWERc. The enterprise has a controlling financial interest in the VI