Reference no: EM132918821

Arvin Manufacturing purchased 80 percent of the stock of Ronnie Mines, Inc., in 2007. In preparing the consolidated financial statements at the end of 2009, the controller of Arvin discovered that Arvin Manufacturing had purchased P750,000 of raw materials from Ronnie Mines during the year. All the inventory purchased was still on hand at year-end. Ronnie Mines had spent P500,000 in producing the items sold to Arvin Manufacturing.

Problem 1: What effect, if any, will failure to eliminate or adjust for these items have on total current assets reported in the consolidated statement of financial position on December 31, 2009?

A. overstated by P250,000

B. overstated by P370,000

C. overstated by P870,000

D. overstated by P750,000