Inter - company transactions Flashcards

1
Q

The purchase by the member of a consolidated group of stock of another member of the consolidated group is treated as

A

a treasury stock transaction. This follows the theory of consolidated financial statements presenting one economic entity. (You cannot make money selling stock to yourself.)

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2
Q

When a company owns less than 50% of the common stock of an investee corporation, the investment account can be reported under the cost or equity method, depending on whether significant influence is exercised. Receivables and payables to the investee are reported

A

separately on the balance sheet.

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3
Q

How are sales and COGS recorded in the IS for over 50% ownership

A

Sales and cost of goods sold should be reduced by the intercompany sales.

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4
Q

consolidated balance sheet, what amount should Parent report as intercompany receivables?

A

0

100% of all intercompany balances among members of the consolidated group are eliminated.

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5
Q

what happens to sales in the consolidated process?

A

All intercompany billings are eliminated in consolidation.

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6
Q

How are advances treated in the consolidated balance sheet

A

All intercompany transactions, including loans and advance, should be eliminated upon consolidation

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