You should work on this assignment as you complete the reading assignment and view the Unit Lecture. Please write your answers in complete sentences. Avoid copying directly from the text; your answers should be in your own words.
- When is the unrealized profit on an intercompany sale of land considered realized? When is profit on an intercompany sale of equipment realized? Why do the two treatments differ?
- Explain the effect of unrealized intercompany profits on consolidated net income in an upstream sale. How is this different from a downstream sale?
- When is the gain or loss on bond retirement included in the consolidate income statement?
- When a bond issue has been placed directly with an affiliate, what account balances will be incorrectly stated in the consolidated statements if the intercompany bond ownership is not eliminated when preparing the consolidated worksheet?
- When an affiliate’s bonds are purchased from a nonaffiliated during the period, what account balances will be incorrectly stated in the consolidated statements if the intercompany bond ownership is not eliminated in preparing the consolidated worksheet?