F4 M6 Flashcards
How do you treat the profit made from intercompany transactions?
100% of the profit made from intercomp transactions should be eliminated even if the
parent owns less than 100%
Can you recognize I/C transactions for companies that dont consolidate?
Intercomp transactions can be recognized for comps who don’t consolidate
Whats the journal entry for intercompany sales to cancel everything out?
Intercomp inventory transaction JEs that must be canceled out: Debit intercomp sales
(the amt parent sold to sub), debit AP still left on sub’s books, credit AR still left on
parent’s books, credit intercomp COGS (the amt recorded by the parent when sale was
made), credit COGS (amt that sub sold to third party), and credit inv (amt that sub sold
to third party)
What is the AJE for intercompany transactions involving inventory?
To correct entries with inv, I must correct the intercomp transaction (sales + COGS) and
correct COGS of inv sold to outsiders and correct EI of inv still on hand
What happens when a member of a consolidated group acquires an affliliates debt bonds?
If one member of a consolidated comp acquires an affiliate’s debt (bonds) from an
outsider, the debt is considered to be retired and a G/L is recognized. The G/L on
extinguishment of debt is calculated as the difference between the diff between the price
paid to acquire the debt and the book val of the debt (ex: I issue bonds at a premium for
300. My BP is 250 and premium is 50. The sub buys the bonds at 275. I must recognize
that as a gain of 25 as an eliminating entry)
What is the JE for IC bond transaction?
Intercomp bond transactions that must be canceled: Debit BP (for amt originally issued),
debit premium (if there is one), credit discount (if there is one), credit investment in bond
(the amt the sub or parent bought the bonds for), and credit gain or debit loss (diff
between BP - amt it was repurchased for)
What other intercompany account balances are eliminated?
All intercomp account balances are also eliminated, such as bond int payable and
receivable
What is the JE for inter company sale of land
Intercomp sale of land transactions that must be canceled: Debit intercomp gain on sale
of land and credit land (to restore it to its original amt)
What is the journal entry for I/C fixed asset transactions?
Intercomp fixed asset transactions that must be canceled: Debit gain on machine, credit
machine (for amt that the sub depreciated it by for the year), and credit acc depr (this
was originally debited when sold to the sub, so I must bring it back)
What is the JE for I/C accumulated depreciation when there is a I/C sale of fixed assets
Additionally, debit acc depr (for the overstated amt of it taken during the year) and credit
depr exp for the same amt
