Question

When a parent and its subsidiary use a periodic inventory system rather than a perpetual system, the income and asset balances reported in the consolidated financial statements are:I. affected only if there are upstream intercompany sales of inventory.II. affected only if there are downstream intercompany sales of inventory.

a. Ib. IIc. Both I and IId. Neither I nor II

Answer 1

a. I

Step-by-step explanation:

Affected only if there are upstream inter-company sales of inventory. Because when this happens you're gonna have a non-static inventory, it's gonna be changing, your gonna need to apply a perpetual system due to the constant change due to the upstreams sales.