Fundamentals of Advanced Accounting 5th Edition by Joe Ben Hoyle,Thomas Schaefer,Timothy Doupnik

Exercise 18

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, ownership of the goods has not changed.