question archive Where there are transactions between the investor and associate that result in an unrealised profit, the investor's share of the associate's profit is: Select one: adjusted regardless of whether the transaction is an upstream or downstream one adjusted only if the transaction is a downstream one adjusted only if the transaction is an upstream one not adjusted at all regardless of whether the transaction is an upstream or downstream one
Where there are transactions between the investor and associate that result in an unrealised profit, the investor's share of the associate's profit is: Select one: adjusted regardless of whether the transaction is an upstream or downstream one adjusted only if the transaction is a downstream one adjusted only if the transaction is an upstream one not adjusted at all regardless of whether the transaction is an upstream or downstream one
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Where there are transactions between the investor and associate that result in an unrealised profit, the investor's share of the associate's profit is:
Select one:
adjusted regardless of whether the transaction is an upstream or downstream one
adjusted only if the transaction is a downstream one
adjusted only if the transaction is an upstream one
not adjusted at all regardless of whether the transaction is an upstream or downstream one
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Answer is A.
Regardless of whether the transaction is an upstream or downstream one, investor's share in profit will be adjusted due to recording of unrealized profits in the company's financial statements.
To record an increase in provision for unrealized gain, the Company would record:
Debit Profit and Loss xxx
Credit Provision for Unrealized Profit xxx
To record a decrease in provision for unrealized gain, the record would be:
Debit Provision for Unrealized Profit xxx
Credit Profit and Loss xxx
So technically, a recording of unrealized profit affects the Net income of the Company, resulting to an adjustment in an investor's share in net income.
Unrealised profit or gain is a profit which has been made through a transaction, such as a stock which has risen in value but still being held ,meaning the profit will only be realized once the stock is sold.
