_____ Which of the following statements is the correct reason for eliminating intercompany transactions for consolidated reporting purposes?
A) Intercompany transactions are related-party transactions.
B) From the perspective of either of the individual companies, intercompany transactions are not bonafide transactions.
C) It is often impractical and in many cases impossible to determine whether the transfer prices approximate prices that could have been obtained with outside, independent parties.
D) The parent company could manipulate the intercompany transfer prices in a manner that is not equitable to the subsidiary.
E) None of the above.

Question

Quizplus · Accepted Answer

Intercompany transactions are eliminated in consolidated reporting to avoid double counting and to present the financial statements as if the group is a single economic entity. The reasons listed in A-D are not the primary reasons for elimination.

_____ Which of the Following Statements Is the Correct Reason