nj - from the consolidated financial statements. These...

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. James Inc., sells inventory to Matthews Company, a related party, at James’s standard markup. At the current fiscal year-end, Matthews still holds some portions of this inventory. If consolidated financial statements are prepared, why are worksheets entries required in two different fiscal periods? Solution: If the goods which are sold to the related party at a price higher than the cost and such goods remains unsold at the end of the fiscal period the mark up portion shall be eliminated
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Unformatted text preview: from the consolidated financial statements. These entries to remove the mark up are passed in two different fiscal period as the profits are unrealised by the realised party and if the stocks are shown at the mark up price then the profits for the fiscal year will stand inflated which will not reflect a fair picture of the financial statement. Moreover showing stocks at inflated value id like earning profits from itself which is not justified....
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This note was uploaded on 02/21/2012 for the course ACT 492 taught by Professor Ngo during the Fall '11 term at Colorado.

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