Fundamentals of Advanced Accounting
6th Edition
ISBN: 9780077862237
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 1Q
To determine
Explain why intra-entity transactions occur so frequently.
Expert Solution & Answer
Answer to Problem 1Q
The intra-entity transactions are less costly in nature when compared to transaction made with other entities.
Explanation of Solution
Occurrence of intra-entity transactions:
Intra-entity transactions occur so frequently between parent and subsidiary because of the reason of generating more profits in consolidated financial statements. The intra-entity transactions are less costly in nature when compared to transaction made with other entities.
The intra-entity transactions are the transactions about sale and purchase of assets between parent and subsidiary where the transaction is recorded as normal sale and the profit is recorded.
However, the intra-entity transactions are removed while preparing the consolidated financial statements.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
How important is intercompany activity on decisions to form business combinations? We see intercompany transfers quite often between companies involved in a business combination. Why do you feel that this happens so frequently? Is this ever a concern to the investors, controlling and noncontrolling?
Describe the different types of legal arrangements that can take place to create a business combination.
Demonstrate the consolidation process when a corporate ownership structure is characterized by a connecting affiliation.
Chapter 5 Solutions
Fundamentals of Advanced Accounting
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - James, Inc., sells inventory to Matthews Company,...Ch. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Use the same information as in problem (5) except...Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - What is the total of consolidated cost of goods...Ch. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - What is the consolidated total for inventory at...Ch. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 1DYSCh. 5 - Prob. 2DYS
Knowledge Booster
Similar questions
- An entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, which requires that: a. All of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. b. All of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity. c. The assets acquired and the liabilities assumed constitute a business. d. All of the above.arrow_forwardA worksheet is being developed to consolidate Allegan, Incorporated, and Stark Company. These two organizations have made considerable intra-entity transactions. How would the consolidation process be affected if these transfers were downstream? How would consolidated financial statements be affected if these transfers were upstream?arrow_forwardWhat are some of the main differnces between IFRS and ASPE for business combinations?arrow_forward
- what are intra-entity transfers? How do you treat intra-entity transfers while consolidating the financial statements of a parent company and its subsidiary?. Discuss with suitable examples.arrow_forwardWhy might different companies account for similar transactions in different ways?arrow_forwardA "group" for consolidation purposes is Group of answer choices An entity, including an unincorporated entity such as partnership, that is controlled by another entity. An entity that obtains control over entities or businesses. An entity that has one or more subsidiaries. A parent and all of the subsidiaries.arrow_forward
- A horizontal merger takes place between companies operating:a. At different stages of the production processb. In the same area of businessc. In unrelated lines of businessd. All of the abovee. None of the abovearrow_forwardCritically discuss [you are expected to understand whether a subsidiary is the alter ego of the parent company, or whether to treat a group of ompanies as one single economic entity.arrow_forwardConsolidation financial statements are prepared when a parent-subsidiary relationship exists in recognition of the accounting principle concept of: a. Reliability b. Entity c. Materiality d. Going Concernarrow_forward
- Which of the following are not related parties? * A company and its Chief Executive Officer Two or more subsidiaries with the same parent Two co-venturers of a common joint venture business. A parent and its subsidiaryarrow_forwardWhich of the following is a vertical combination? a. A combination where the two entities are competitor in the same industry b. A combination where the two entities have a potential buyer/seller relationship c. A combination where the two entities are unrelated d. None of the above describes a vertical combinationarrow_forward. It is a type of business combination wherein an investor, having an existing involvement in the investee, acquires additional investment in order to obtain control over the investee. a. Business combination achieved by contract alone b. Business combination achieved by mere exchanges of equity interests c. Business combination achieved in stages d. Baby step combinationarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education