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 from gross profit overstatements
C. Gross profits must be deferred indefinitely because sales among affiliates always remain in the consolidation group
D. When intra-entity sales remain in ending inventory, ownership of the goods has not changes
Answer: D. When intra-entity sales remain in ending inventory, ownership of the goods has not changes.