ADVANCED FINANCIAL ACCOUNTING IA
ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Chapter 7, Problem 7.2.1E
To determine

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The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.

:

The correct statement regarding the consolidation entry during the preparation of financial statement.

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Upper Company holds 60 percent of Lower Company’s voting shares. During the preparation of consolidated financial statements for 20x4, the following eliminating entry was made:      Retained earnings, January 1     10,000                     Land                                       10,000 Which of the following statements is correct? A. Upper Company purchased land from Lower Company during 20x4. B. Upper Company purchase land from Lower Company before January 1, 20x4. C. Lower Company purchased land from Upper Company during 20x4. D. Lower Company purchased land from Upper Company before January 1, 20x4.
Upper Company holds 60 percent of Lower Company’s voting During the preparation of consolidated financial statements for 20x4, the following eliminating entry was made: Retained earnings, January 1                    10,000                  Land                                                                  10,000   Which of the following statements is correct?   A. Upper Company purchased land from Lower Company during B. Upper Company purchase land from Lower Company before January 1, C. Lower Company purchased land from Upper Company during D. Lower Company purchased land from Upper Company before January 1, 20x4.
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent.   (b) On 20 December 20x1, a 70%-owned Subsidiary sold a piece of inventory Y which it bought for $300,000 to its Parent for $200,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date.

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ADVANCED FINANCIAL ACCOUNTING IA

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