Answer:
D. Unconfirmed intercompany profit on upstream ending inventory is debited to beginning retained earnings, while it is debited to investment in subsidiary for downstream salesnconfirmed intercompany profit on upstream ending inventory is debited to beginning retained earnings, while it is debited to investment in subsidiary for downstream sales
Step-by-step explanation:
An upstream sales is a term that describe a situation whereby a subsidiary company sells products or services to its parent company, while the downstream sales is termed as a situation whereby the parents company sells goods or services to one of its subsidiaries company.
However, because such intercompany transaction sales shows no actual gain or loss to the company, it is termed as Unconfirmed Profit or Unrealized Profit, thus, there is need to eliminate it from the book of consolidation entity.
Therefore the major difference on how consolidated entries differs between the upstream sales and downstream sales is the treatment of unrealized profit.
Hence, unconfirmed or unrealized intercompany profit on upstream sales of inventory will be debited to beginning retained earnings, while the unrealized or unconfirmed profit from downstream sales will be debited to investment.