Daniels Inc. acquired 85% of the outstanding common stock of Noyce Corp.in 2021. Noyce currently owes Daniels $400,000 for inventory acquired during 2022. In preparing consolidated financial statements for 2022, what amount of Noyce's liability should be eliminated?
A) $0.
B) $60,000.
C) $300,000.
D) $340,000.
E) $400,000.

Question

Quizplus · Accepted Answer

In consolidated financial statements, intercompany transactions and balances are eliminated. Since Noyce owes Daniels $400,000, this entire amount should be eliminated to avoid double counting within the consolidated entity.