FAR 3 Intercompany transactions Flashcards

1
Q

Eliminate 100% of Intercompany transactions

A

1. Balance sheet 100% eliminate

a. Eliminate 100% of all intercompany payables and receivables
b. Eliminate 100% of intercompany gross profit in ending inventory and fixed assets of parent or subsidiary

_2. Income statement 100% eliminate _

a. Interest expense/income
b. Gain on sale / Depreciation expense
c. Sales/ COGS

**3. Not consolidated = not eliminated **

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2
Q

Intercompany merchandise transactions

A

Intercompany sales

Retained earnings

                                 Intercompany COGS

                                  COGS 

                                  Ending inventory
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3
Q

Intercompany BOND transactions

A

If one member of the consolidated group acquires an affiliate’s debt from an outsider, the debt is considered to be retired and a gain/loss is recognized on the consolidated income statement.

Price paid - BV of debt = gain/loss

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