Question

"Perez Inc., applies the equity method for its 25 percent investment in senior, Inc. during 2015, Perez sold goods with a 40 percent gross profit to senior. senior sold all of these goods in 2015. how should Perez report the effect of the intra-equity sale on its 2015 income statement

Answer 1

no adjustment is necessary

Step-by-step explanation:

The intra sale means the sale which is made between the two firms of the same industry

Plus, when the intra sale is made and the stock is fully sold than there is no adjustment required

And, if the stock remained so the unrealized profit should be ignored

So according to the given case, the all goods are sold so there is no need for adjustment