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During 20X3, Edwards Co. sold inventory to its parent company, First Corp. First still owned the entire inventory purchased at the end of 20X3. Why

  1. During 20X3, Edwards Co. sold inventory to its parent company, First Corp. First still owned the entire inventory purchased at the end of 20X3. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 20X3?
  2. How does a parent company account for the sale of a portion of an investment in a subsidiary assuming the patent maintains control after the sale? What happens if the parent does not maintain control after the exchange?

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