If Better Off Economically, Why Not Report It? In late 2006, Pia Inc. sold inventory costing

$60,000 to its 60%-owned subsidiary, Sia Inc., for $100,000 with payment being made on deliv¬

ery. As of 12/31/06, Sia had not resold any of this inventory.

Required 1. Does the fact that Pia was paid in full have any significance as to whether $40,000 or only

$24,000 (60% of $40,000) should be deferred for consolidated reporting purposes? Why or why not?

2. Have Pia’s stockholders benefited economically to the e.xtent of $16,000 (40% X $40,000)?

Why or why not?

3. If the FASB were to change GAAP so that this $16,000 could be recognized in 2006 for report¬

ing to Pia’s stockholders, can you think of any accompanying provisions that should be stipu¬ lated to maintain financial reporting integrity?