Intercompany Transactions

Question 1

How much should be eliminated in intercompany transactions?

Answer 1

100%

Question 2

Do you eliminate intercompany transactions when not consolidating?

Answer 2

No

Question 3

What account is corrected when inventory is sold to outsiders?

Answer 3

Correct cost of goods sold

Question 4

What account is corrected when inventory still on hand?

Answer 4

Correct ending inventory

Question 5

What is the journal entry to record the sale of inventory?

Answer 5

Dr. AR, Cr. Intercompany sales, Dr. Intercompany cost of goods sold, Cr. Inventory

Question 6

What is the journal entry to record the purchase of intercompany inventory?

Answer 6

Dr. Inventory, Cr. AP

Question 7

What is the journal entry to elimate intercompany sales and cost of goods sold, AP, and AR?

Answer 7

Dr. Intercompany sales, Cr. Intercompany cost of goods sold, Cr. Cost of goods sold, Cr. Inventory, Dr. AP, Cr. AR

Question 8

If one member of the consolidated group acquires an affiliate’s debt from an outsider, the debt is considered to be?

Answer 8

Retired and a gain/loss is recognized on the consolidated income statement