Intercompany Transactions

Transactions between the affiliates are referred to as…

• Intercompany Transactions

• Sales Transactions

• Profit Transactions

• Eliminate Transactions

In the preparation of consolidated financial statements, intercompany balances and transactions shall be eliminated.

• TRUE

• FALSE

Most intercompany transactions can be grouped in three categories, which are:

• Inventory, Plant Assets and Bonds

• Inventory, Receivables and Cash

• Equity, Fair Value and Consolidation

• Income, Balance and Cash Flow

Revenue on sales between affiliates cannot be recognized until merchandise is sold outside of the consolidated entity.

• TRUE

• FALSE

Parent Corp sold merchandise to Subsidiary Corp that originally cost $500 for $800. Subsidiary Corp then sold 70% of that merchandise for $850. Calculate the unrealized gain reflected on the ending inventory of the Subsidiary Corp.

• $90

• $80

• $240

• $150